Menu Costs and the Neutrality of Money

32 Pages Posted: 23 Aug 2000 Last revised: 26 Apr 2021

See all articles by Andrew Caplin

Andrew Caplin

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Daniel F. Spulber

Northwestern University - Kellogg School of Management

Date Written: July 1987

Abstract

A model of endogenous price adjustment under money growth is presented. Firms follow (s, S) pricing policies and price revisions are imperfectly synchronized. In the aggregate, price stickiness disappears and money is neutral. The connection between firm price adjustment and relative price variability in the presence of monetary growth is also investigated. The results contrast with those obtained in models with exogenous fixed timing of price adjustment.

Suggested Citation

Caplin, Andrew and Spulber, Daniel F., Menu Costs and the Neutrality of Money (July 1987). NBER Working Paper No. w2311, Available at SSRN: https://ssrn.com/abstract=228016

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Daniel F. Spulber

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