This paper provides new insight into the relationship between inflation and consumer price setting by examining a large data set of Mexican consumer prices covering episodes of both low and high inflation, as well as the transition between the two. The overall portrait is one in which the...

In this paper we use optimal-instrument and new finite-sample methods to test the empirical relevance of the New Keynesian Phillips curve (NKPC) equation. Unlike generalized method of moments-based methods, these generalized Anderson-Rubin tests are immune to the presence of weak instruments,...

We present a simple sticky-price model with inventories and show that the employment response to a productivity shock depends crucially on the extent to which goods are storable. If firms hold inventories, then, in response to a favorable cost shock, firms can expand output relative to sales....