Sectoral price data and models of price setting

Bartosz Maćkowiak, Emanuel Moench and Mirko Wiederholt ()

Journal of Monetary Economics, 2009, vol. 56, issue S, S78-S99

Abstract: In the median sector, 100 percent of the long-run response of the sectoral price index to a sector-specific shock occurs in the month of the shock. The standard Calvo model and the standard sticky-information model can match this finding only under extreme assumptions concerning the profit-maximizing price. The rational-inattention model of Maćkowiak and Wiederholt [2009a. Optimal sticky prices under rational inattention. American Economic Review 99, 769–803] can match this finding without an extreme assumption concerning the profit-maximizing price. Furthermore, there is little variation across sectors in the speed of response of sectoral price indexes to sector-specific shocks. The rational-inattention model matches this finding, while the Calvo model predicts too much cross-sectional variation.

Keywords: Bayesian dynamic factor model; Calvo model; Menu cost; Sticky information; Rational inattention (search for similar items in EconPapers)
JEL-codes: C11 D21 D83 E31 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (98)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393209000877
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Sectoral Price Data and Models of Price Setting (2009)
Working Paper: Sectoral Price Data and Models of Price Setting (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:56:y:2009:i:s:p:s78-s99

DOI: 10.1016/j.jmoneco.2009.06.012

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().