Menu Costs and Inflation Asymmetries - Some Micro Data Evidence
AbstractThe 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).
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7102.
Date of creation: 2007
Date of revision:
Menu Cost; Inflation Asymmetry; Sectoral Heterogeneity; Value-Added Tax;
Other versions of this item:
- Peter Karadi & Adam Reiff, 2007. "Menu Costs and Inflation Asymmetries Some Micro Data Evidence," IEHAS Discussion Papers 0706, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
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