Aggregate Price Stickiness

Zhiyong An

Annals of Economics and Finance, 2009, vol. 10, issue 1, 15-28

Abstract: We accomplish two tasks to characterize aggregate price stickiness in this paper. First, we endogenize beta , the fraction of the firms keeping their price unchanged following a money supply shock in the near-rationality model (Akerlof and Yellen, 1985) by introducing a distribution of price-adjustment barriers among the firms into the near-rationality model. Second, as ? can be considered an indicator of aggregate price stickiness by its definition, the endogenized ? enables us to characterize aggregate price stickiness by studying its properties. We show that: (1) ...; (2)...; and (3) the possibility of multiple equilibrium values of ?, where .. is the fraction change in money supply.

Keywords: Small menu costs; Near-rationality; Aggregate price stickiness; Strategic complementarity; Coordination failure (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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