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Price rigidity in Brazil: Microeconomic evidence and Macroeconomic Implications

Author

Listed:
  • Debora Silva Oliveira
  • Mauro Rodrigues

Abstract

This paper calibrates multi-sector models of menu costs with intermediate inputs to the Brazilian economy. In particular, we use the model proposed by Nakamura and Steinsson (2010) to undestand the degree of monetary non-neutralitry induced by price rigidity. For comparison, we estimate a VAR model for the aggregate economy (Shapiro and Watson, 1988) and compute the share of real GDP fluctuations due to nominal shocks. Multi-sector models account for up to 12.6% of output fluctuations. This is consistent with our VAR estimations, where the nominal component is responsible for approximately 15% of the observed variation in aggregate output.

Suggested Citation

  • Debora Silva Oliveira & Mauro Rodrigues, 2021. "Price rigidity in Brazil: Microeconomic evidence and Macroeconomic Implications," Working Papers, Department of Economics 2021_21, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2021wpecon21
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    File URL: http://www.repec.eae.fea.usp.br/documentos/Oliveira_Rodrigues_21WP.pdf
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    More about this item

    Keywords

    Price rigidity; monetary non-neutrality; Microdata;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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