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Price elasticities and demand-side real rigidities in micro data and in macro models

Guenter Beck () and Sarah Lein ()

Journal of Monetary Economics, 2020, vol. 115, issue C, 200-212

Abstract: High degrees of demand-side real rigidities are able to generate the large monetary non-neutrality found in aggregate data. This paper provides micro-based evidence on the key parameters governing this rigidity using European homescan data. We find strong evidence for demand-side real rigidity, which is, however, significantly lower than that normally assumed in macro models. In a menu-cost model calibrated to our estimates, we show that these estimates are associated with reasonable values for production-side parameters, but they are not able to generate the degree of monetary non-neutrality observed in macro data.

Keywords: Demand curve; Price elasticity; Super-elasticity; Real rigidities; Monetary non-neutrality (search for similar items in EconPapers)
JEL-codes: C3 D12 E30 E31 E50 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jmoneco.2019.06.003

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