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Small and Large Price Changes and the Propagation of Monetary Shocks / Fernando Alvarez, Hervé Le Bihan, Francesco Lippi.
- Format:
- Book
- Author/Creator:
- Alvarez, Fernando.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w20155.
- NBER working paper series no. w20155
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2014.
- Summary:
- 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, the size-distribution of price changes has a positive excess kurtosis. We propose an analytical menu cost model that encompasses several classic models, as Taylor (1980), Calvo (1983), Reis (2006), Golosov and Lucas (2007) and accounts for observed cross-sectional patterns. We show that the ratio of kurtosis to the frequency of price changes is a sufficient statistics for the real effects of monetary policy in a large class of models.
- Notes:
- Print version record
- May 2014.
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