Price Points and Price Dynamics
Volker Hahn () and
Michal Marencak ()
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Michal Marencak: Department of Economics, Graduate School of Decision Science, University of Konstanz
No 2018-01, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz
This paper proposes a macroeconomic model with positive trend inflation that involves an important role for price points as well as sticky information. We argue that, in particular, a variant of our model that allows for a general distribution of price points is more successful in explaining several stylized facts of individual price setting than a benchmark model that is based on Calvo price-setting. More specifically, it makes empirically reasonable predictions with regard to the duration of price spells, the sizes of price increases and decreases, the shape of the hazard function, the fraction of price changes that are price increases, and the relationship between price changes and inflation. Moreover, our model implies plausible aggregate effects of monetary policy in contrast with a model with a prominent role for price points but no information rigidities.
Keywords: price stickiness; price point; sticky information (search for similar items in EconPapers)
JEL-codes: E31 E37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
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Working Paper: Price Points and Price Dynamics (2018)
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