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Inflation equals the product of two terms: the fraction of items with price changes (whose volatility figures prominently in state-dependent pricing models), and the average size of those price changes (the only source of fluctuations in time-dependent pricing models). The variance of inflation...
Persistent link: https://www.econbiz.de/10005132787
I construct a quantitative equilibrium model in which price-setting agents have imperfect information about the state of the economy. The model is used to ask whether monetary shocks can generate persistent movements in output. In the model agents obtain information from two sources: costly...
Persistent link: https://www.econbiz.de/10011082000
The effectiveness of monetary policy depends, to a large extent, on market expectations of its future actions. In a standard New Keynesian business cycle model with rational expectations, systematic monetary policy reduces the variance of inflation and output gap by at least two-thirds. These...
Persistent link: https://www.econbiz.de/10010818178
Rising consumer prices may reflect shifts by consumers to new higher-priced products, mostly for durable and semi-durable goods. I apply Bils’ (2009) methodology to newly available Canadian consumer price data for non-shelter goods and services to estimate how price increases can be divided...
Persistent link: https://www.econbiz.de/10010849942
Macroeconomists have traditionally ignored the behavior of temporary price markdowns (“sales”) by retailers. Although sales are common in the micro price data, they are assumed to be unrelated to macroeconomic phenomena and generally filtered out. We challenge this view. First, using the...
Persistent link: https://www.econbiz.de/10010960391
This article describes experimental economics, in general, and new developments in experimental macroeconomics, in particular. The approach has a clear niche in providing evidence on economic phenomena that cannot be observed directly or that are difficult to measure. Experimental work conducted...
Persistent link: https://www.econbiz.de/10010961538
This article describes experimental economics, in general, and new developments in experimental macroeconomics, in particular. The approach has a clear niche in providing evidence on economic phenomena that cannot be observed directly or that are difficult to measure. Experimental work conducted...
Persistent link: https://www.econbiz.de/10010961767
Persistent link: https://www.econbiz.de/10010933480
Inflation equals the product of two terms: an extensive margin (the fraction of items with price changes) and an intensive margin (the average size of those price changes). The variance of inflation over time can be decomposed into contributions from each margin. The extensive margin figures...
Persistent link: https://www.econbiz.de/10005085185
We assess the implications of price indexation for estimated frequency of price adjustment in sticky price models of business cycles. These models predominantly assume that non-reoptimized prices are indexed to lagged or average inflation. The assumption of price indexation adds tractability...
Persistent link: https://www.econbiz.de/10005808332