Asymmetric (S,s) Pricing: Implications for Monetary Policy

This paper presents a model of asymmetric (S,s) pricing. We investigate implications of such a behavior for the effectiveness of the monetary policy. We discuss two types of asymmetric responses to monetary interventions. One is the symmetry in the responses to positive and negative monetary shocks. The other is the variance in responses to monetary shocks during booms and recessions. The conclusion is that first type of asymmetry can be attributed to the asymmetry in adjustment bands, while the second kind of asymmetry is a result of firm heterogeneity, and asymmetry of (S,s) bands does not contribute to it.