Models of price setting and inflation dynamics

James Costain and Anton Nakov

Chapter 10 in Research Handbook on Inflation, 2025, pp 207-239 from Edward Elgar Publishing

Abstract: We review models of nominal price adjustment based on optimizing or near-optimal behavior, including menu cost models, generalized hazard function models, and models of frictional decisions. We also discuss the role of real rigidities, and assess these models’ success in explaining retail microdata and inflation dynamics.

Keywords: Sticky prices; State-dependent price setting; Hazard function; Menu costs; Frictional decisions (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035327751
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