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The Price-Change Statistics We’ve Weighted For

Author

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  • Christopher D. Cotton
  • Vaishali Garga

Abstract

The real effects of monetary policy depend on price stickiness. Existing studies that measure aggregate stickiness using US consumer price index microdata hold the consumption basket fixed. This yields a lower level of stickiness in 2024 compared with 1978. We show instead that stickiness is unchanged. Although individual products now change prices more frequently, the effect is largely offset by shifts in consumer spending, notably toward services with stickier prices. These consumption-basket shifts reduce the estimated decline in monetary non neutrality by 25 percentage points, suggesting that monetary policy remains far more effective than methods used in existing studies imply.

Suggested Citation

  • Christopher D. Cotton & Vaishali Garga, 2026. "The Price-Change Statistics We’ve Weighted For," Working Papers 26-2, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:103045
    DOI: 10.29412/res.wp.2026.06
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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