Search, Market Power, and Inflation Dynamics
AbstractThe short-run non-neutrality of money and its implications for inflation dynamics are examined in a monetary search economy with heterogeneous agents. Lump-sum money injections affect the distribution of money holdings in equilibrium and thus generate short-run non-neutrality. The response of prices and inflation to shocks of this type depends on the changes in households' search intensity that they induce. Monetary shocks change the distribution of prices in equilibrium and thus alter the returns to search. The resulting changes in optimal search intensity affect sellers' profit maximizing markups and thus may result in sluggish price adjustment and persistent inflation despite the absence of restrictions of sellers; ability to set prices in every period
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 559.
Date of creation: 03 Dec 2006
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Price Dispersion; Inflation; Mark-ups; Dynamics;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-13 (All new papers)
- NEP-CBA-2007-01-13 (Central Banking)
- NEP-DGE-2007-01-13 (Dynamic General Equilibrium)
- NEP-MAC-2007-01-13 (Macroeconomics)
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.:
- Miguel Molico, 2006. "The Distribution Of Money And Prices In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 701-722, 08.
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"A Fundamental Theory of Exchange Rates and Direct Currency Trades,"
993, Queen's University, Department of Economics.
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- Allen Head & Shouyong Shi, 2002. "A Fundamental Theory of Exchange Rates and Direct Currency Trades," Working Papers shouyong-03-01, University of Toronto, Department of Economics.
- Jonathan Chiu, 2007.
"Endogenously Segmented Asset Market in an Inventory Theoretic Model of Money Demand,"
07-46, Bank of Canada.
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- Allen Head & Alok Kumar, 2004.
"Price Dispersion, Inflation and Welfare,"
NajEcon Working Paper Reviews
- Miguel Molico & Yahong Zhang, 2006. "Monetary Policy and the Distribution of Money and Capital," Computing in Economics and Finance 2006 136, Society for Computational Economics.
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