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Menu Costs and Phillips Curves / Mikhail Golosov, Robert E. Lucas.
- Format:
- Book
- Author/Creator:
- Golosov, Mikhail.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w10187.
- NBER working paper series no. w10187
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2003.
- Summary:
- This paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation. Sellers can change price only by incurring a real menu cost.' We calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new U.S. data set of individual prices due to Klenow and Kryvtsov. The prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with the Israeli evidence obtained by Lach and Tsiddon. The model is also used to conduct numerical experiments on the economy's response to credible and incredible disinflations and other shocks. In none of the simulations we conducted did monetary shocks induce large or persistent real responses.
- Notes:
- Print version record
- December 2003.
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