American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Persistent Monetary Non-neutrality in an Estimated Menu Cost Model with Partially Costly Information
American Economic Journal: Macroeconomics
vol. 15,
no. 2, April 2023
(pp. 466–505)
Abstract
We propose a model that reconciles microeconomic evidence of frequent and large price changes with sizable monetary non-neutrality. Firms incur separate lump-sum costs to change prices and to gather and process some information about marginal costs. Additional relevant information is continuously available and can be factored into pricing decisions at no cost. We estimate the model by Simulated Method of Moments, using price-setting statistics for the US economy. The model with free idiosyncratic and costly aggregate information fits well both targeted and untargeted microeconomic moments and generates almost three times as much monetary non-neutrality as the Calvo model.Citation
Bonomo, Marco, Carlos Carvalho, René Garcia, Vivian Malta, and Rodolfo Rigato. 2023. "Persistent Monetary Non-neutrality in an Estimated Menu Cost Model with Partially Costly Information." American Economic Journal: Macroeconomics, 15 (2): 466–505. DOI: 10.1257/mac.20190241Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- E23 Macroeconomics: Production
- E31 Price Level; Inflation; Deflation
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
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