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Menu costs, (s,S) rule, imperfect information and the neutrality of money

  • Franck Portier

    ()

    (Université de Toulouse (GREMAQ, IDEI, LEERNA, Institut Universitaire de France and CEPR))

A dynamic macroeconomic model of monopolistic competition and imperfect information with menu costs and (s,S) pricing rule is proposed, in the lines of Caballero and Engel [1991]. The model can be seen as an imperfect competition version of Lucas [1973] with menu costs. The presence of informational imperfection destroys the neutrality result of Caplin and Spulber [1987], and the effect of a monetary shock on output is shown to be an increasing function of the degree of strategic complementarity between firms.

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File URL: http://www.accessecon.com/pubs/EB/2004/Volume5/EB-04E30003A.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 5 (2004)
Issue (Month): 7 ()
Pages: 1-8

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Handle: RePEc:ebl:ecbull:eb-04e30003
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  1. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  2. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  3. 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.
  4. Andrew C. Caplin & Daniel F. Spulber, 1987. "Menu Costs and the Neutrality of Money," NBER Working Papers 2311, National Bureau of Economic Research, Inc.
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