Buy this book
In the data, a large fraction of price changes are temporary. We provide a simple menu cost model which explicitly includes a motive for temporary price changes. We show that this simple model can account for the main regularities concerning temporary and permanent price changes. We use the model as a benchmark to evaluate existing shortcuts that do not explicitly model temporary price changes. One shortcut is to take the temporary changes out of the data and fit a simple Calvo model to it. If we do so prices change only every 50 weeks and the Calvo model overestimates the real effects of monetary shocks by almost 70%. A second shortcut is to leave the temporary changes in the data. If we do so prices change every 3 weeks and the Calvo model produces only 1/9 of the real effects of money as in our benchmark. We show that a simple Calvo model can generate the same real effects as our benchmark model if we set parameters so that prices change every 17 weeks.
Buy this book
Edition | Availability |
---|---|
1
Temporary price changes and the real effects of monetary policy
2008, Federal Reserve Bank of Minneapolis, Research Dept.
Electronic resource
in English
|
aaaa
|
Book Details
Edition Notes
Title from PDF file (viewed on Oct. 10, 2008).
"May 2008."
Includes bibliographical references.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.
Classifications
The Physical Object
ID Numbers
Community Reviews (0)
Feedback?December 22, 2020 | Edited by MARC Bot | import existing book |
December 10, 2009 | Created by WorkBot | add works page |