Shocks vs Menu Costs: Patterns of Price Rigidity in an Estimated Multi-Sector Menu-Cost Model

Erwan Gautier
Authors registered in the RePEc Author Service: Hervé LE BIHAN

Working papers from Banque de France

Abstract: Relying on a menu-cost model augmented with a time-dependent (Calvo) component, we investigate the structural sources of cross-sectoral heterogeneity in patterns of price setting. We use a large micro dataset of French consumer prices to estimate the model at the product level for 227 products. The Calvo component is found to be large in most sectors. Heterogeneity in structural parameters is also substantial. The combination of these two features leads to much larger real effects of monetary policy. The effect of monetary shock on output is more than 4 times larger than the one derived from a standard single-sector menu-cost model estimated using average moments.

Keywords: Price rigidity; menu cost; (S; s) models; adjustment cost; heterogeneity (search for similar items in EconPapers)
JEL-codes: D43 E31 L11 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2018
New Economics Papers: this item is included in nep-eur and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Shocks vs Menu Costs: Patterns of Price Rigidity in an Estimated Multi-Sector Menu-Cost Model (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:682

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