Economics at your fingertips  

The Real Effects of Monetary Shocks in Sticky Price Models: A Sufficient Statistic Approach

Fernando Alvarez, Hervé Le Bihan () and Francesco Lippi

American Economic Review, 2016, vol. 106, issue 10, 2817-51

Abstract: We prove that the ratio of kurtosis to the frequency of price changes is a sufficient statistic for the real effects of monetary shocks, measured by the cumulated output response following the shock. The sufficient statistic result holds in a large class of models which includes Taylor (1980); Calvo (1983); Reis (2006); Golosov and Lucas (2007); Nakamura and Steinsson (2010); Midrigan (2011); and Alvarez and Lippi (2014). Several models in this class are able to account for the positive excess kurtosis of the size distribution of price changes that appears in the data. We review empirical measures of kurtosis and frequency and conclude that a model that successfully matches the microevidence on kurtosis and frequency produces real effects that are about four times larger than in the Golosov-Lucas model, and about 30 percent below those of the Calvo model. We discuss the robustness of our results to changes in the setup, including small inflation and leptokurtic cost shocks.

JEL-codes: E23 E31 E52 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.20140500
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25) Track citations by RSS feed

Downloads: (external link) (application/pdf) ... YykezeOnl8nIGjZbtv2S (application/zip) ... kl0-g488knb-becHzgU- (application/pdf) ... HBcPRC9M67YOVuFlh0Ge (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: The real effects of monetary shocks in sticky price models. A sufficient statistic approach (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

Page updated 2019-10-14
Handle: RePEc:aea:aecrev:v:106:y:2016:i:10:p:2817-51