We present a sticky price model that features the coexistence of many price changes, most of which are temporary, with a modest flexibility of the aggregate price level. Stickiness is introduced in the form of a price plan, namely a set of two prices: either price can be charged at any moment but changing the plan entails a menu cost. We analytically solve for the optimal plan and for the aggregate output response to a monetary shock. We present evidence consistent with the model implications using scanner data, as well as Consumer Price Index data across a wide range of inflation rates.

Temporary Price Changes, Inflation Regimes and the Propagation of Monetary Shocks / Lippi, Francesco; Alvarez, Fernando. - In: AMERICAN ECONOMIC JOURNAL, MACROECONOMICS. - ISSN 1945-7715. - 12:1(2020), pp. 104-152. [10.1257/mac.20180383]

Temporary Price Changes, Inflation Regimes and the Propagation of Monetary Shocks

Francesco Lippi;
2020

Abstract

We present a sticky price model that features the coexistence of many price changes, most of which are temporary, with a modest flexibility of the aggregate price level. Stickiness is introduced in the form of a price plan, namely a set of two prices: either price can be charged at any moment but changing the plan entails a menu cost. We analytically solve for the optimal plan and for the aggregate output response to a monetary shock. We present evidence consistent with the model implications using scanner data, as well as Consumer Price Index data across a wide range of inflation rates.
Temporary Price Changes, Inflation Regimes and the Propagation of Monetary Shocks / Lippi, Francesco; Alvarez, Fernando. - In: AMERICAN ECONOMIC JOURNAL, MACROECONOMICS. - ISSN 1945-7715. - 12:1(2020), pp. 104-152. [10.1257/mac.20180383]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11385/190984
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