Multi-Sector Menu Cost Model, Decreasing Hazard, and Phillips Curve

Hidetaka Enomoto
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Hidetaka Enomoto: Bank of Japan

No 07-E-3, Bank of Japan Working Paper Series from Bank of Japan

Abstract: This paper generalizes the Golosov-Lucas model (GL model), a single sector menu cost model with idiosyncratic productivity shocks, to multisector setting. While the GL model matches some empirical facts, it cannot mimic decreasing hazard functions for price changes, which are observed in many countries. With realistic parameters, the simulation results of the generalized GL model show many features observed in empirical evidences such as decreasing hazard rates. In addition, the simulation results with monetary shocks show flattening of the Phillips curve in a low inflation environment.

Keywords: Menu Cost Models; Hazard Functions; Phillips Curve (search for similar items in EconPapers)
JEL-codes: E30 (search for similar items in EconPapers)
Date: 2007-02
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Citations: View citations in EconPapers (4)

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