The Analytic Theory of a Monetary Shock

Fernando E. Alvarez and Francesco Lippi

No 28464, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose an analytical method to analyze the propagation of a once-and-for-all shock in a broad class of sticky price models. The method is based on the eigenvalue- eigenfunction representation of the dynamics of the cross-sectional distribution of firms’ desired adjustments. A key novelty is that, under assumptions that are appropriate for low-inflation economies, we can approximate the whole profile of the impulse response for any moment of interest in response to an aggregate shock (any displacement of the invariant distribution). We present several applications and discuss extensions.

JEL-codes: E5 E50 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ore
Note: EFG ME
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Citations: View citations in EconPapers (5)

Published as Alvarez, F. and Lippi, F. (2022), The Analytic Theory of a Monetary Shock. Econometrica, 90: 1655-1680.

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Related works:
Journal Article: The Analytic Theory of a Monetary Shock (2022)
Working Paper: The Analytic Theory of a Monetary Shock (2021)
Working Paper: The Analytic Theory of a Monetary Shock (2019)
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