Prices are sticky after all

Patrick Kehoe and Virgiliu Midrigan

Journal of Monetary Economics, 2015, vol. 75, issue C, 35-53

Abstract: Economists have interpreted the evidence that prices change every four months as implying that sticky prices cannot be important for monetary transmission. Theory implies that this interpretation is correct if most price changes are regular, but not if a large fraction are temporary, as in the data. Since regular prices are much stickier than temporary ones, our models predict that the stickiness of the aggregate price level matches that in a standard Calvo model or a standard menu cost model in which micro-level prices change about once a year. In this sense, prices are sticky after all.

Keywords: Sales; Sticky prices; Menu costs (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (123)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393214001809
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Prices are Sticky After All (2010)
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:75:y:2015:i:c:p:35-53

DOI: 10.1016/j.jmoneco.2014.12.004

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 ().