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(S,s) inventories, state-dependent prices and the propagation of nominal shocks

Author

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  • Julia K. Thomas

    (Federal Reserve Bank of Philadelphia and NBER)

  • Aubhik Khan

    (Federal Reserve Bank of Philadelphia)

Abstract

The typical shape of our model's two-dimensional hazard and its changes over time necessarily depend upon the distributions of menu costs and fixed order costs. We calibrate these distributions using firm-level pricing data (as used by Midrigan (2006)) alongside aggregate data on inventories, sales and production from the NIPA (as used by Khan and Thomas (2007)). We solve the model using an analytical characterization of firms' binary decisions on price and/or inventory adjustment together with a numerical approach similar to that implemented in Khan and Thomas (2007).

Suggested Citation

  • Julia K. Thomas & Aubhik Khan, 2008. "(S,s) inventories, state-dependent prices and the propagation of nominal shocks," 2008 Meeting Papers 947, Society for Economic Dynamics.
    • Handle: RePEc:red:sed008:947
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    References listed on IDEAS

    as
    1. 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, President and Fellows of Harvard College, vol. 123(3), pages 863-904.
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