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What Can Measured Beliefs Tell Us About Monetary Non-Neutrality?

Hassan Afrouzi, Joel P. Flynn and Choongryul Yang

No 32541, NBER Working Papers from National Bureau of Economic Research, Inc

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%.

JEL-codes: E31 E32 E71 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-mon
Note: EFG ME
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Citations: View citations in EconPapers (1)

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