The Micro-level Price Response to Monetary Policy

Almut Balleer and Peter Zorn ()

VfS Annual Conference 2020 (Virtual Conference): Gender Economics from Verein für Socialpolitik / German Economic Association

Abstract: We estimate the effects of monetary policy on price-setting behavior in administrative micro data underlying the German producer price index. After expansionary monetary policy, the increase in the frequency of price change is economically small, the average absolute size across all price changes falls, and the aggregate price level hardly adjusts as a result. These estimates imply a strong degree of monetary non-neutrality because they rule out quantitative structural models that generate small and transient effects of monetary policy through selection on large price adjustments.

Keywords: price setting; extensive margin; intensive margin; monetary policy; local projections; menu cost (search for similar items in EconPapers)
JEL-codes: E30 E31 E32 E52 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc20:224557

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