Selection and monetary non-neutrality in time-dependent pricing models

Carlos Carvalho and Felipe Schwartzman

Journal of Monetary Economics, 2015, vol. 76, issue C, 141-156

Abstract: For a given frequency of price adjustment, monetary non-neutrality is smaller if older prices are disproportionately more likely to change. Selection for the age of prices provides a complete characterization of price-setting frictions in time-dependent models. Selection for older prices is weaker and non-neutralities are larger if the hazard function of price adjustment is less strongly increasing. Selection is weaker if there is heterogeneity in price stickiness. Finally, selection is weaker if durations of price spells are more variable. In particular, the Taylor (1979) model exhibits maximal selection for older prices, whereas the Calvo (1983) model exhibits no selection.

Keywords: Time-dependent pricing; Selection effect; Monetary non-neutrality; General hazard function; Heterogeneity (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (22)

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Related works:
Working Paper: Selection and Monetary Non-Neutrality in Time-Dependent Pricing Models (2014)
Working Paper: Selection and monetary non-neutrality in time-dependent pricing models (2012)
Working Paper: Selection and Monetary Non-Neutrality in Time-Dependent Pricing Models (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:76:y:2015:i:c:p:141-156

DOI: 10.1016/j.jmoneco.2015.09.002

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