Economics at your fingertips  

Monetary policy, markup dispersion, and aggregate TFP

Timo Reinelt and Matthias Meier

No 2427, Working Paper Series from European Central Bank

Abstract: We document three new empirical facts: (i) monetary policy shocks increase the markup dispersion across firms, (ii) they increase the relative markup of firms with stickier prices, and (iii) firms with stickier prices have higher markups. This is consistent with a New Keynesian model in which price rigidity is heterogeneous across firms. In the model, firms with more rigid prices optimally set higher markups and their markups increase by more after monetary policy shocks. The consequent increase in markup dispersion explains a negative aggregate TFP response. In a calibrated model, monetary policy shocks generate substantial fluctuations in aggregate productivity. JEL Classification: E30, E50

Keywords: aggregate productivity; heterogeneous price rigidity; markup dispersion; monetary policy (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Working Paper: Monetary Policy,Markup Dispersion, and Aggregate TFP (2020) Downloads
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:

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

Page updated 2023-03-27
Handle: RePEc:ecb:ecbwps:20202427