Decoupling nominal and real rigidities
Philipp J. König and
Economics Letters, 2017, vol. 156, issue C, 129-132
We revisit Ball and Romer’s (1990) canonical model of price setting with menu costs that exhibits multiple equilibria. We show that changes to firms’ markups move nominal and real rigidities in opposite directions. Using game-theoretic tools to derive a unique equilibrium, we find that accounting for agents’ endogenous adjustment of price expectations further weakens the link between real and nominal rigidities.
Keywords: Global games; Menu costs; Sticky prices (search for similar items in EconPapers)
JEL-codes: E31 C70 D82 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:156:y:2017:i:c:p:129-132
Access Statistics for this article
Economics Letters is currently edited by Economics Letters Editorial Office
More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().