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The Real Effects of Monetary Shocks: Evidence from Micro Pricing Moments

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This paper evaluates the informativeness of eight micro pricing moments for monetary non-neutrality. Frequency of price changes is the only robustly informative moment. The ratio of kurtosis over frequency is significant only because of frequency, and insignificant when non-pricing moments are included. Non-pricing moments are additionally informative about monetary non-neutrality, indicating potential omitted variable bias and the inability of pricing moments to serve as sufficient statistics. In contrast to existing theoretical work, this ratio has an ambiguous relationship with monetary non-neutrality in a quantitative menu cost model. We show which modeling ingredients explain this discrepancy, providing guidance on modeling choices.

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  • Gee Hee Hong & Matthew Klepacz & Ernesto Pasten & Raphael Schoenle, 2021. "The Real Effects of Monetary Shocks: Evidence from Micro Pricing Moments," Working Papers 21-17, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwq:93012
    DOI: 10.26509/frbc-wp-202117
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    Cited by:

    1. Foellmi, Reto & Jaeggi, Adrian & Schnell, Fabian, 2020. "Currency appreciation, distance to border and price changes: Evidence from Swiss retail prices," Economics Working Paper Series 2007, University of St. Gallen, School of Economics and Political Science.
    2. Lippi, Francesco & Alvarez, Fernando & Ferrara, Andrea & Gautier, Erwan & Le Bihan, Hervé, 2021. "Empirical Investigation of a Sufficient Statistic for Monetary Shocks," CEPR Discussion Papers 16626, C.E.P.R. Discussion Papers.
    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; menu cost; micro moments; sufficient statistics;
    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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