Monetary Shocks in a Model with Inattentive Producers
We study a model in which prices respond slowly to shocks because firms must pay a fixed cost to observe the determinants of the profit maximizing price, as pioneered by Caballero (1989) and Reis (2006). We extend their analysis to the case of random transitory variation in the firm’s observation cost and characterize the mapping from the distribution of observation cost to the distribution of the times between consecutive reviews/ price adjustments of a firm. We aggregate a continuum of firms and characterize analytically the cross-sectional distribution of the duration of reviews/prices. We establish the dependence of the real effect of a monetary shock on the distribution of price durations and hence on the distribution of observation costs and discuss applications.
|Date of creation:||Aug 2012|
|Date of revision:||Nov 2012|
|Contact details of provider:|| Postal: |
Phone: +39 066790013
Fax: +39 0647924872
Web page: http://www.eief.it/repecEmail:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fernando E. Alvarez & Francesco Lippi & Luigi Paciello, 2010.
"Optimal price setting with observation and menu costs,"
NBER Working Papers
15852, National Bureau of Economic Research, Inc.
- Fernando E. Alvarez & Francesco Lippi & Luigi Paciello, 2011. "Optimal Price Setting With Observation and Menu Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1909-1960.
- Fernando Alvarez & Francesco Lippi & Luigi Paciello, 2010. "Optimal Price Setting with Observation and Menu Costs," EIEF Working Papers Series 1010, Einaudi Institute for Economics and Finance (EIEF), revised May 2010.
- Alvarez, Fernando & Lippi, Francesco & Paciello, Luigi, 2010. "Optimal price setting with observation and menu costs," CEPR Discussion Papers 7861, C.E.P.R. Discussion Papers.
- F. Alvarez & F. Lippi & L. Paciello, 2010. "Optimal price setting with observation and menu costs," 2010 Meeting Papers 478, Society for Economic Dynamics.
- Carlos Viana de Carvalho & Felipe Schwartzman, 2014.
"Selection and Monetary Non-Neutrality in Time-Dependent Pricing Models,"
Textos para discussão
627, Department of Economics PUC-Rio (Brazil).
- Felipe Schwartzman & Carlos Carvalho, 2012. "Selection and Monetary Non-Neutrality in Time-Dependent Pricing Models," 2012 Meeting Papers 987, Society for Economic Dynamics.
- Carlos Carvalho & Felipe Schwartzman, 2012. "Selection and monetary non-neutrality in time-dependent pricing models," Working Paper 12-09, Federal Reserve Bank of Richmond.
- Bonomo, Marco & Carvalho, Carlos, 2004.
"Endogenous Time-Dependent Rules and Inflation Inertia,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 36(6), pages 1015-41, December.
- Marco Bonomo & Carlos Carvalho, 2004. "Endogenous Time-Dependent Rules and Inflation Inertia," Macroeconomics 0402005, EconWPA, revised 19 May 2005.
- Marco Bonomo & Carlos Carvalho & René Garcia, 2010. "State-dependent pricing under infrequent information: a unified framework," Staff Reports 455, Federal Reserve Bank of New York.
- Ricardo Reis, 2005.
2005 Meeting Papers
290, Society for Economic Dynamics.
When requesting a correction, please mention this item's handle: RePEc:eie:wpaper:1208. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Facundo Piguillem)
If references are entirely missing, you can add them using this form.