Menu Costs and Phillips Curves
By Mikhail Golosov, Robert E. Lucas, Jr.. Journal of Political Economy, 2007
909 citations recorded by the source corpus.
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 international evidence from various studies. The model is also used to conduct numerical experiments on the economy’s response to various shocks. In none of the simulations we conducted did monetary shocks induce large or persistent real responses.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/63865fc51ecc8b39bf12f0f5505802f92545a7b9
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
- Emi Nakamura
- Joseph Vavra
- Jón Steinsson
- Michael Woodford
- Peter J. Klenow
- Olivier J. Blanchard
- Jonathan L. Willis
- Virgiliu Midrigan
Citations in the corpus
- Optimal Sticky Prices Under Rational Inattention (2009, neutral): “First, if the profit function is given by (18) and if (39) holds, objective (45) is a monotonic transformation of objective (12).”
- THE MORPHOLOGY OF PRICE DISPERSION (2015, neutral): “According to this theory, identical goods are traded at different prices because they are sold by local monopolists who face different marginal costs (see, e.g., Golosov and Lucas, 2007).”