Quality, price stickiness, and monetary policy
Journal of Macroeconomics, 2019, vol. 61, issue C, -
The low-price, low-quality brands change prices more frequently than the high-price, high-quality brands within the same product category. The greater price rigidity for high-quality brands leads to asymmetric effects of monetary policy on the rich and the poor. For instance, monetary policy shocks have larger real effects on high-income consumers who purchase more high-quality brands. This means that the rich benefit more from expansionary monetary shocks but suffer more from contractionary shocks than the poor. I build a menu-cost model with vertically differentiated products. The model predicts that monetary policy shocks have an approximately four times larger impact on the consumption of high-quality brands.
Keywords: Price stickiness; Quality; Vertical differentiation; Income; Monetary policy (search for similar items in EconPapers)
JEL-codes: E21 E32 E52 (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:jmacro:v:61:y:2019:i:c:4
Access Statistics for this article
Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos
More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().