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Menu Costs and Phillips Curves Author info | Abstract | Publisher info | Download info | Related research | Statistics Robert Lucas
Mike Golosov
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This paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation. Sellers can change price only by incurring a real menu cost.' We calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new U.S. data set of individual prices due to Klenow and Kryvtsov. The prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with the Israeli evidence obtained by Lach and Tsiddon. The model is also used to conduct numerical experiments on the economy's response to credible and incredible disinflations and other shocks. In none of the simulations we conducted did monetary shocks induce large or persistent real responses
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Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number
144.
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Date of creation: 2004Date of revision:
Handle: RePEc:red:sed004:144Contact details of provider: Postal: Society for Economic Dynamics Anne Stubing CV Starr Center for Applied Economics 269 Mercer Street, Room 303 New York University New York, NY 10003 Fax: 1-860-486-4463 Email: Web page: http://www.EconomicDynamics.org/society.htm More information through EDIRC
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Keywords: menu cost ; sticky prices ; Other versions of this item:
Find related papers by JEL classification: E0 - Macroeconomics and Monetary Economics - - General
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References listed on IDEAS 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.: Peter J. Klenow & Oleksiy Kryvtsov, 2005.
"State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation? ,"
NBER Working Papers
11043, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Peter J. Klenow & Oleksiy Kryvtsov, 2005.
"State-Dependent or Time-Dependent Pricing: Does It Matter for Recent U.S. Inflation? ,"
Working Papers
05-4, Bank of Canada.
[Downloadable!] Oleksiy Kryvtsov & Peter J. Klenow, 2004.
"State-Dependent or Time-Dependent Pricing: Does It Matter For Recent U.S. Inflation? ,"
Computing in Economics and Finance 2004
277, Society for Computational Economics.
[Downloadable!] Peter J. Klenow & Oleksiy Kryvtsov, 2008.
"State-Dependent or Time-Dependent Pricing: Does It Matter for Recent U.S. Inflation? ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 123(3), pages 863-904, August.
[Downloadable!] (restricted) Almeida Neto, Heitor Vieira de & Bonomo, Marco Antônio Cesar, 1999.
"Optimal State-Dependent Rules, Credibility, and Inflation Inertia ,"
Economics Working Papers (Ensaios Economicos da EPGE)
349, Graduate School of Economics, Getulio Vargas Foundation (Brazil).
[Downloadable!]
Other versions:
Almeida, Heitor & Bonomo, Marco, 2002.
"Optimal state-dependent rules, credibility, and inflation inertia ,"
Journal of Monetary Economics ,
Elsevier, vol. 49(7), pages 1317-1336, October.
[Downloadable!] (restricted) Caplin, Andrew S & Spulber, Daniel F, 1987.
"Menu Costs and the Neutrality of Money ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 102(4), pages 703-25, November.
[Downloadable!] (restricted)
Other versions: Spence, Michael, 1976.
"Product Selection, Fixed Costs, and Monopolistic Competition ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 43(2), pages 217-35, June.
[Downloadable!] (restricted)
Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999.
"State-Dependent Pricing And The General Equilibrium Dynamics Of Money And Output ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 114(2), pages 655-690, May.
[Downloadable!] (restricted)
Mankiw, N Gregory, 1985.
"Small Menu Costs and Large Business Cycles: A Macroeconomic Model ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 100(2), pages 529-38, May.
[Downloadable!] (restricted)
Burstein, Ariel T., 2006.
"Inflation and output dynamics with state-dependent pricing decisions ,"
Journal of Monetary Economics ,
Elsevier, vol. 53(7), pages 1235-1257, October.
[Downloadable!] (restricted)
Sheshinski, Eytan & Weiss, Yoram, 1977.
"Inflation and Costs of Price Adjustment ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 44(2), pages 287-303, June.
[Downloadable!] (restricted)
Chang, Fwu-Ranq, 1999.
"Homogeneity and the Transactions Demand for Money ,"
Journal of Money, Credit and Banking ,
Blackwell Publishing, vol. 31(4), pages 720-30, November.
Susanto Basu & John G. Fernald, 1996.
"Returns to scale in U.S. production: estimates and implications ,"
International Finance Discussion Papers
546, Board of Governors of the Federal Reserve System (U.S.).
[Downloadable!]
Other versions: Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2000.
"Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data ,"
NBER Working Papers
7981, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: Julio J. Rotemberg & Michael Woodford, 1993.
"Dynamic General Equilibrium Models with Imperfectly Competitive Product Markets ,"
NBER Working Papers
4502, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Daniel Levy & Mark Bergen & Shantanu Dutta & Robert Venable, 2005.
"The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains ,"
Macroeconomics
0505012, EconWPA.
[Downloadable!]
Other versions: Caplin, Andrew & Leahy, John, 1991.
"State-Dependent Pricing and the Dynamics of Money and Output ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 106(3), pages 683-708, August.
[Downloadable!] (restricted)
Other versions: Lach, Saul & Tsiddon, Daniel, 1992.
"The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data ,"
Journal of Political Economy ,
University of Chicago Press, vol. 100(2), pages 349-89, April.
[Downloadable!] (restricted)
Mark Bils & Peter J. Klenow, 2002.
"Some Evidence on the Importance of Sticky Prices ,"
NBER Working Papers
9069, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: Sheshinski, Eytan & Weiss, Yoram, 1983.
"Optimum Pricing Policy under Stochastic Inflation ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 50(3), pages 513-29, July.
[Downloadable!] (restricted)
Robert E. Lucas, 2003.
"Macroeconomic Priorities ,"
American Economic Review ,
American Economic Association, vol. 93(1), pages 1-14, March.
[Downloadable!]
Dixit, Avinash K & Stiglitz, Joseph E, 1977.
"Monopolistic Competition and Optimum Product Diversity ,"
American Economic Review ,
American Economic Association, vol. 67(3), pages 297-308, June.
[Downloadable!] (restricted)
Other versions: Frenkel, Jacob A & Jovanovic, Boyan, 1980.
"On Transactions and Precautionary Demand for Money ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 95(1), pages 25-43, August.
[Downloadable!] (restricted)
Other versions: David M. Kreps & Jose A. Scheinkman, 1983.
"Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes ,"
Bell Journal of Economics ,
The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
[Downloadable!] (restricted)
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