The expectational pass-through in a generalized time-dependent price-setting model

We examine how expectations of future inflation influence current inflation in a generalized time-dependent (GTD) price-setting framework. We find that the expectational pass-through depends only on discounting and on the parameters of the hazard function governing price resets. It increases with the initial hazard, is hump-shaped with respect to the hazard slope, and varies with the effective pricing horizon implied by the hazard func-tion, which shapes aggregation-driven rollback and catch-up effects across price vintages. Using GTD estimates, we show that the Calvo approximation systematically overestimates pass-through. In the 1980s–1990s period, commonly associated with stronger nominal anchors, pass-through is often higher, although changes are heterogeneous across economies.