Asymmetric Price Adjustment and Economic Fluctuations
AbstractThis paper considers a possible explanation for asymmetric adjustment of nominal prices. We present a menu-cost model in which positive trend inflation causes firms' relative prices to decline automatically between price adjustments. In this environment, shocks that raise firms' desired prices trigger larger price responses than shocks that lower desired prices. We use this model of asymmetric adjustment to address three issues in macroeconomics: the effects of aggregate demand, the effects of sectoral shocks, and the optimal rate of inflation.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4089.
Date of creation: May 1994
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Other versions of this item:
- Ball, Laurence & Mankiw, N Gregory, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," Economic Journal, Royal Economic Society, vol. 104(423), pages 247-61, March.
- Ball, L. & Mankiw, N.G., 1992. "Asymmetric Price Adjustment and Economic Fluctuations," Harvard Institute of Economic Research Working Papers 1602, Harvard - Institute of Economic Research.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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