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Menu costs, (s,S) rule, imperfect information and the neutrality of money

Franck Portier ()

Economics Bulletin, 2004, vol. 5, issue 7, 1-8

Abstract: A dynamic macroeconomic model of monopolistic competition and imperfect information with menu costs and (s,S) pricing rule is proposed, in the lines of Caballero and Engel [1991]. The model can be seen as an imperfect competition version of Lucas [1973] with menu costs. The presence of informational imperfection destroys the neutrality result of Caplin and Spulber [1987], and the effect of a monetary shock on output is shown to be an increasing function of the degree of strategic complementarity between firms.

JEL-codes: E3 (search for similar items in EconPapers)
Date: 2004-04-12
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