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Sticky Prices and Monetary Policy: Evidence from Disaggregated US Data

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  • Jean Boivin
  • Marc P. Giannoni
  • Ilian Mihov

Abstract

This paper shows that the recent evidence that disaggregated prices are volatile does not necessarily challenge the hypothesis of price rigidity used in a large class of macroeconomic models. We document the effect of macroeconomic and sectoral disturbances by estimating a factor-augmented vector autoregression using a large set of macroeconomic indicators and disaggregated prices. Our main finding is that disaggregated prices appear sticky in response to macroeconomic and monetary disturbances, but flexible in response to sectorspecific shocks. The observed flexibility of disaggregated prices reflects the fact that sector-specific shocks account on average for 85 percent of their monthly fluctuations. (JEL E13, E31, E32, E52)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 1 (March)
Pages: 350-84

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:1:p:350-84

Note: DOI: 10.1257/aer.99.1.350
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