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Multi-Sector Menu Cost Model, Decreasing Hazard, and Phillips Curve

Author

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  • Hidetaka Enomoto

    (Bank of Japan)

Abstract

This paper generalizes the Golosov-Lucas model (GL model), a single sector menu cost model with idiosyncratic productivity shocks, to multisector setting. While the GL model matches some empirical facts, it cannot mimic decreasing hazard functions for price changes, which are observed in many countries. With realistic parameters, the simulation results of the generalized GL model show many features observed in empirical evidences such as decreasing hazard rates. In addition, the simulation results with monetary shocks show flattening of the Phillips curve in a low inflation environment.

Suggested Citation

  • Hidetaka Enomoto, 2007. "Multi-Sector Menu Cost Model, Decreasing Hazard, and Phillips Curve," Bank of Japan Working Paper Series 07-E-3, Bank of Japan.
    • Handle: RePEc:boj:bojwps:07-e-3
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    File URL: http://www.boj.or.jp/en/research/wps_rev/wps_2007/data/wp07e03.pdf
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    Citations

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    Cited by:

    1. Sohei Kaihatsu & Mitsuru Katagiri & Noriyuki Shiraki, 2017. "Phillips Curve and Price-Change Distribution under Declining Trend Inflation," Bank of Japan Working Paper Series 17-E-5, Bank of Japan.
    2. Carlos Carvalho & Niels Arne Dam, 2009. "Estimating the cross-sectional distribution of price stickiness from aggregate data," Staff Reports 419, Federal Reserve Bank of New York.
    3. Sohei Kaihatsu & Mitsuru Katagiri & Noriyuki Shiraki, 2023. "Phillips Correlation and Price‐Change Distributions under Declining Trend Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(5), pages 1271-1305, August.

    More about this item

    Keywords

    Menu Cost Models; Hazard Functions; Phillips Curve;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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