We present a model that characterizes the relationship between optimal dynamic cash management and the choice of the means of payment. The novel feature of the model is the sequential nature of the payments choice: in each instant the agent can choose to pay with either cash or credit. This...

We study models where prices respond slowly to shocks because firms are rationally inattentive. Producers must pay a cost to observe the determinants of the current profit maximizing price, and hence observe them infrequently. To generate large real effects of monetary shocks in such a model the...

We consider an inventory model for a liquid asset where the per-period net expenditures have two components: one that is frequent and small and another that is infrequent and large. We give a theoretical characterization of the optimal management of liquid asset as well as of the implied...

We document the presence of both small and large price changes in individual price records from the CPI in France and the US. After correcting for measurement error and cross-section heterogeneity we find that the size distribution of price changes has a positive excess kurtosis, with a shape...

We present new evidence on the presence of both small and large price changes in individual price records from the CPI both in France and in the US. After correcting for measurement error and cross-section heterogeneity we find that the size distribution of price changes has a positive excess...

We compute the impulse response to an aggregate monetary shock in a general equilibrium model where firms set prices subject to observation and menu costs. The firm optimally decides when to "review" costly information on the adequacy of its price. Upon each review, the firm chooses whether to...

We compute the impulse response of output to an aggregate monetary shock in a general equilibrium when firms set prices subject to a costly observation of the state and a menu cost. We study how the aggregate effects of a monetary shock depend on the relative size of these costs. We find that...

We study a model in which prices respond slowly to shocks because firms must pay a fixed cost to observe the determinants of the profit maximizing price, as pioneered by Caballero (1989) and Reis (2006). We extend their analysis to the case of random tran- sitory variation in the firm’s...

We model the pricing decisions of a multi-product firm that faces a fixed 'menu' cost: once the cost is paid, the firm can adjust the price of all its products. We characterize analytically the steady state firm’s decision in terms of the structural parameters: the variability of the flexible...

We present a model that characterizes the relationship between optimal dynamic cash management and the choice of the means of payment. The novel feature of the model is the sequential nature of the payments choice. In each instant the agent can choose to pay with either cash or credit. This...