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

Hassan Afrouzi, Joel Flynn and Choongryul Yang

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

Abstract: This paper studies how to use microeconomic data on beliefs and prices to identify the relative contributions of pricing and information frictions to monetary non-neutrality. In a canonical general equilibrium model with both pricing frictions and information acquisition, we analytically characterize how these frictions contribute to non-neutrality. Exploiting this characterization, we show that data on the cross-sectional distributions of uncertainty and pricing durations are necessary and sufficient to identify non-neutrality. Implementing our approach in survey data, we find that: (i) information and pricing frictions are approximately equally important, and (ii) assuming exogenous information would overstate non-neutrality by 60%.

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 (2)

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