What Can Measured Beliefs Tell Us About Monetary Non-Neutrality?
Hassan Afrouzi,
Joel P. Flynn () and
Choongryul Yang
Additional contact information
Joel P. Flynn: https://economics.yale.edu/people/joel-flynn
No 2024-053, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)
Abstract:
This paper studies how measured beliefs can be used to identify monetary non-neutrality. In a general equilibrium model with both nominal rigidities and endogenous information acquisition, we analytically characterize firms’ optimal dynamic information policies and how their beliefs affect monetary non-neutrality. We then show that data on the cross-sectional distributions of uncertainty and pricing durations are both necessary and sufficient to identify monetary non-neutrality. Finally, implementing our approach in New Zealand survey data, we find that informational frictions approximately double monetary non-neutrality and endogeneity of information is important: models with exogenous information would overstate monetary non-neutrality by approximately 50%.
Keywords: Measured beliefs; Nominal rigidities; Rational inattention; Monetary non-neutrality (search for similar items in EconPapers)
JEL-codes: E31 E32 E71 (search for similar items in EconPapers)
Pages: 55 p.
Date: 2024-07-12
New Economics Papers: this item is included in nep-dge and nep-mon
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Citations: View citations in EconPapers (1)
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https://www.federalreserve.gov/econres/feds/files/2024053pap.pdf (application/pdf)
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Working Paper: What Can Measured Beliefs Tell Us About Monetary Non-Neutrality? (2024) 
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2024-53
DOI: 10.17016/FEDS.2024.053
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