Real effects of monetary policy shocks in menu cost models depend crucially on the distribution of the size of price changes. With a realistically high kurtosis, Midrigan (2011) overturned the standard Golosov and Lucas (2007) result of small and temporary real effects and found them nearly as...

In this paper, we establish three new facts about price-setting by multi-product firms and contribute a model that can explain our findings. Our findings have important implications for real effects of nominal shocks and provide guidance for how to model pricing decisions of firms. On the...