Persistent Monetary Non-neutrality in an Estimated Menu Cost Model with Partially Costly Information

Marco Bonomo, Carlos Carvalho, René Garcia, Vivian Malta and Rodolfo Rigato

American Economic Journal: Macroeconomics, 2023, vol. 15, issue 2, 466-505

Abstract: We propose a model that reconciles microeconomic evidence of frequent and large price changes with sizable monetary non-neutrality. Firms incur separate lump-sum costs to change prices and to gather and process some information about marginal costs. Additional relevant information is continuously available and can be factored into pricing decisions at no cost. We estimate the model by Simulated Method of Moments, using price-setting statistics for the US economy. The model with free idiosyncratic and costly aggregate information fits well both targeted and untargeted microeconomic moments and generates almost three times as much monetary non-neutrality as the Calvo model.

JEL-codes: D21 D83 E23 E31 L11 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20190241 (application/pdf)
https://doi.org/10.3886/E150221V1 (text/html)
https://www.aeaweb.org/doi/10.1257/mac.20190241.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
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: https://EconPapers.repec.org/RePEc:aea:aejmac:v:15:y:2023:i:2:p:466-505

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mac.20190241

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

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