Menu Costs and Inflation Asymmetries Some Micro Data Evidence
The paper explains the observed asymmetric inflation response to value-added tax (VAT) changes in Hungary by calibrating a standard sectoral menu cost model on a new micro-level CPI data set. The model is able to reproduce important moments of the data, and finds that the asymmetry can be explained by the interaction of menu costs, (sectoral) trend inflation and forward-looking firms, thereby it provides direct evidence to the argument of Ball and Mankiw (1994).
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2003-07, Bar-Ilan University, Department of Economics.
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"Menu Costs and Phillips Curves,"
2004 Meeting Papers
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2004 Meeting Papers
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- Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
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NBER Working Papers
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- Midrigan, Virgiliu, 2006. "Menu costs, multi-product firms, and aggregate fluctuations," CFS Working Paper Series 2007/13, Center for Financial Studies (CFS).
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