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Nonlinear Dynamics in Menu Cost Economies? Evidence from U.S. Data

Author

Listed:
  • Andrés Blanco
  • Corina Boar
  • Callum J. Jones
  • Virgiliu Midrigan

Abstract

We show that standard menu cost models cannot simultaneously reproduce the dispersion in the size of micro-price changes and the extent to which the fraction of price changes increases with inflation in the U.S. time-series. Though the Golosov and Lucas (2007) model generates fluctuations in the fraction of price changes, it predicts too little dispersion in the size of price changes and therefore little monetary non-neutrality. In contrast, versions of the model that reproduce the dispersion in the size of price changes and generate stronger monetary non-neutrality predict a nearly constant fraction of price changes.

Suggested Citation

  • Andrés Blanco & Corina Boar & Callum J. Jones & Virgiliu Midrigan, 2024. "Nonlinear Dynamics in Menu Cost Economies? Evidence from U.S. Data," NBER Working Papers 32748, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32748
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    Cited by:

    1. Elisa Guglielminetti & Alessandro Lin & Andrea Tiseno, 2025. "The many shades of uncertainty and monetary policy," Questioni di Economia e Finanza (Occasional Papers) 978, Bank of Italy, Economic Research and International Relations Area.

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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