Abstract

https://ssrn.com/abstract=2675693
 


 



Price Dispersion and Inflation: New Facts and Theoretical Implications


Viacheslav Sheremirov


Federal Reserve Banks - Federal Reserve Bank of Boston

2015-07-01

FRB of Boston Working Paper No. 15-10

Abstract:     
From a macroeconomic perspective, price rigidity is often perceived to be an important source of price dispersion, with significant implications for the dynamic properties of aggregate variables, welfare calculations, and the design of optimal policy. For instance, in standard New Keynesian models, the key cost of business cycles stems from the price dispersion resulting from firms' inability to adjust prices instantaneously. However, different macroeconomic models make conflicting predictions about the level of price dispersion, as well as about its dynamic properties and sensitivity to inflation. These contrasting predictions can help us to discriminate across alternative models. This paper examines the link between price dispersion and inflation, and the role of sales in this relationship.

Number of Pages in PDF File: 49

Keywords: inflation, price dispersion, sales, sticky prices

JEL Classification: E17, E31, E37, E40, E52


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Date posted: October 19, 2015  

Suggested Citation

Sheremirov, Viacheslav, Price Dispersion and Inflation: New Facts and Theoretical Implications (2015-07-01). FRB of Boston Working Paper No. 15-10. Available at SSRN: https://ssrn.com/abstract=2675693

Contact Information

Viacheslav Sheremirov (Contact Author)
Federal Reserve Banks - Federal Reserve Bank of Boston ( email )
600 Atlantic Avenue
Boston, MA 02210
United States
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