EconPapers    
Economics at your fingertips  
 

Pricing Policies and Inflation Inertia

Michael Kumhof (), Luis Cespedes () and Eric Parrado ()

No 03/87, IMF Working Papers from International Monetary Fund

Abstract: This paper provides a monetary model with nominal rigidities that differs from the conventional New Keynesian model with firms setting pricing policies instead of price levels. In response to permanent or highly persistent monetary policy shocks this model generates the empirically observed slow (inertial) and prolonged (persistent) reaction of the inflation rate, and also the recession that typically accompanies moderate disinflations. The reason is that firms respond to such shocks mostly through a change in the long-run or inflation updating component of their pricing policies. With staggered pricing policies there is a time lag before this is reflected in aggregate inflation.

Keywords: Demand for money; Disinflation; Monetary policy; Inflation; Pricing policy; inflation rate, price level, monetary economics, Inflation inertia, pricing policies, (search for similar items in EconPapers)
Pages: 27
Date: 2003-04-01
References: Add references at CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=16441 (application/pdf)

Related works:
Working Paper: Pricing Policies and Inflation Inertia (2003) 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: https://EconPapers.repec.org/RePEc:imf:imfwpa:03/87

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Jim Beardow ().

 
Page updated 2020-04-07
Handle: RePEc:imf:imfwpa:03/87