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Aggregate Price Stickiness

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  • Zhiyong An

    (China Economics and Management Academy Central University of Finance and Economics)

Abstract

We accomplish two tasks to characterize aggregate price stickiness in this paper. First, we endogenize beta , the fraction of the firms keeping their price unchanged following a money supply shock in the near-rationality model (Akerlof and Yellen, 1985) by introducing a distribution of price-adjustment barriers among the firms into the near-rationality model. Second, as ? can be considered an indicator of aggregate price stickiness by its definition, the endogenized ? enables us to characterize aggregate price stickiness by studying its properties. We show that: (1) ...; (2)...; and (3) the possibility of multiple equilibrium values of ?, where .. is the fraction change in money supply.

Suggested Citation

  • Zhiyong An, 2009. "Aggregate Price Stickiness," Annals of Economics and Finance, Society for AEF, vol. 10(1), pages 15-28, May.
    • Handle: RePEc:cuf:journl:y:2009:v:10:i:1:p:15-28
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    References listed on IDEAS

    as
    1. 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, President and Fellows of Harvard College, vol. 114(2), pages 655-690.
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    More about this item

    Keywords

    Small menu costs; Near-rationality; Aggregate price stickiness; Strategic complementarity; Coordination failure;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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