Nonlinear Dynamics in Menu Cost Economies? Evidence from U.S. Data

Andres Blanco, Corina Boar (), Callum Jones and Virgiliu Midrigan

No 2024-076, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We show that standard menu cost models cannot simultaneously reproduce the dispersion in the size of micro-price changes and the extent to which the fraction of price changes increases with inflation in the U.S. time-series. Though the Golosov and Lucas (2007) model generates fluctuations in the fraction of price changes, it predicts too little dispersion in the size of price changes and therefore little monetary nonneutrality. In contrast, versions of the model that reproduce the dispersion in the size of price changes and generate stronger monetary non-neutrality predict a nearly constant fraction of price changes.

Keywords: Menu costs; Inflation; Fraction of price changes (search for similar items in EconPapers)
Pages: 20 p.
Date: 2024-09-20
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
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https://www.federalreserve.gov/econres/feds/files/2024076pap.pdf (application/pdf)

Related works:
Working Paper: Nonlinear Dynamics in Menu Cost Economies? Evidence from U.S. Data (2024)
Working Paper: Nonlinear Dynamics in Menu Cost Economies? Evidence from U.S. Data (2024)
Working Paper: Nonlinear Dynamics in Menu Cost Economies? Evidence from U.S. Data (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2024-76

DOI: 10.17016/FEDS.2024.076

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