On Implications of Micro Price Data for Macro Models
Humboldt University of Berlin - Faculty of Economics
European Central Bank (ECB); KU Leuven - Center for Economic Studies
November 12, 2008
ECB Working Paper No. 960
We review the recent literature that studies new, detailed micro data on prices. We discuss implications of the new micro data for macro models. We argue that the new micro data are helpful for macro models, but not decisive. There is no simple mapping from the frequency of price changes in micro data to impulse responses of prices and quantities to shocks. We discuss ideas that promise to deliver macro models matching the impulse responses seen in macro data while being broadly in line with micro data.
Number of Pages in PDF File: 55
Keywords: Sticky prices, micro price data, models of price setting, real effects of nominal shocks
JEL Classification: E3, E5
Date posted: November 19, 2008
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