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The real effects of monetary shocks: Evidence from micro pricing moments

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  • Hong, Gee Hee
  • Klepacz, Matthew
  • Pasten, Ernesto
  • Schoenle, Raphael

Abstract

Empirically, what pricing moments are informative about monetary non-neutrality? The frequency of price changes is robustly informative among a set of pricing moments and across specifications: A lower frequency is statistically significantly associated with higher monetary non-neutrality, in line with models of price rigidities. Other moments that describe the price change distribution are not consistently or significantly related to monetary non-neutrality. While the frequency explains the largest share of variation in non-neutrality, no pricing moments individually or jointly explain a majority of the variation in a linear empirical setting. Non-pricing moments explain additional variation, however are not consistently associated with monetary non-neutrality. A multi-sector menu cost model featuring different price adjustment technologies across sectors can rationalize our main findings.

Suggested Citation

  • Hong, Gee Hee & Klepacz, Matthew & Pasten, Ernesto & Schoenle, Raphael, 2023. "The real effects of monetary shocks: Evidence from micro pricing moments," Journal of Monetary Economics, Elsevier, vol. 139(C), pages 1-20.
    • Handle: RePEc:eee:moneco:v:139:y:2023:i:c:p:1-20
    DOI: 10.1016/j.jmoneco.2023.06.004
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    3. Henkel, Lukas, 2020. "Sectoral output effects of monetary policy: do sticky prices matter?," Working Paper Series 2473, European Central Bank.

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    More about this item

    Keywords

    Price-setting; Monetary non-neutrality; Micro moments;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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