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Shocks vs Menu Costs: Patterns of Price Rigidity in an Estimated Multi-Sector Menu-Cost Model

Author

Listed:
  • Erwan Gautier

    (Banque de France)

  • Hervé Le Bihan

    (Banque de France)

Abstract

Relying on a menu cost model augmented with a time{dependent (Calvo) component, we investigate the structural sources of cross-sectoral heterogeneity in patterns of price setting. We use a large microdataset of French consumer prices to estimate the model at the product-level for 227 products. The Calvo component is found to be large in most sectors. Heterogeneity in structural parameters is found to be substantial. These two features combined result in a sizable amplification of the degree of monetary policy non-neutrality, as compared to a single sector pure menu-cost model estimated with aggregate moments.

Suggested Citation

  • Erwan Gautier & Hervé Le Bihan, 2018. "Shocks vs Menu Costs: Patterns of Price Rigidity in an Estimated Multi-Sector Menu-Cost Model," 2018 Meeting Papers 248, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:248
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    References listed on IDEAS

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    Cited by:

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    3. Mark N. Harris & Hervé Le Bihan & Patrick Sevestre, 2020. "Identifying Price Reviews by Firms: An Econometric Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(2-3), pages 293-322, March.
    4. Carvalho, Carlos & Kryvtsov, Oleksiy, 2021. "Price selection," Journal of Monetary Economics, Elsevier, vol. 122(C), pages 56-75.
    5. Apaitan, Tosapol & Disyatat, Piti & Manopimoke, Pym, 2020. "Thai inflation dynamics: A view from disaggregated price data," Economic Modelling, Elsevier, vol. 84(C), pages 117-134.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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