Ball, Laurence; Mankiw, N Gregory - In: The Quarterly Journal of Economics 110 (1995) 1, pp. 161-93
This paper proposes a theory of supply shocks, or shifts in the short-run Phillips curve, based on relative-price changes and frictions in nominal price adjustment. When price adjustment is costly, firms adjust to large shocks but not to small shocks, and so large shocks have disproportionate...