Menu Costs and Inflation Asymmetries - Some Micro Data Evidence

Peter Karadi and Adam Reiff

MPRA Paper from University Library of Munich, Germany

Abstract: The paper explains the observed asymmetric inflation response to value-added tax (VAT) changes in Hungary by calibrating a standard sectoral menu cost model on a new micro-level CPI data set. The model is able to reproduce important moments of the data, and finds that the asymmetry can be explained by the interaction of menu costs, (sectoral) trend inflation and forward looking firms, thereby it provides direct evidence to the argument of Ball and Mankiw (1994).

Keywords: Menu Cost; Inflation Asymmetry; Sectoral Heterogeneity; Value-Added Tax (search for similar items in EconPapers)
JEL-codes: E30 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Menu Costs and Inflation Asymmetries Some Micro Data Evidence (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:7102

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