The expectational pass-through in a generalized time-dependent price-setting model

Elton Beqiraj, Giuseppe Ciccarone and Giovanni Di Bartolomeo

No 282, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Rome

Abstract: We examine how expectations of future inflation influence current inflation in a generalized time-dependent (GTD) price-setting framework. We find that the expectational pass-through depends only on discounting and on the parameters of the hazard function governing price resets. It increases with the initial hazard, is hump-shaped with respect to the hazard slope, and varies with the effective pricing horizon implied by the hazard func-tion, which shapes aggregation-driven rollback and catch-up effects across price vintages. Using GTD estimates, we show that the Calvo approximation systematically overestimates pass-through. In the 1980s–1990s period, commonly associated with stronger nominal anchors, pass-through is often higher, although changes are heterogeneous across economies.

Keywords: Expectational pass-through; Inflation persistence; Price-setting models; Hazard functions; Monetary policy transmission; Generalized time-dependent pricing (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 (search for similar items in EconPapers)
Pages: 30
Date: 2026-05
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