The Real Effects of Monetary Shocks: Evidence from Micro Pricing Moments
71 Pages Posted: 14 Mar 2019 Last revised: 2 Sep 2021
Date Written: August 15, 2021
This paper evaluates the informativeness of pricing moments for monetary non-neutrality. Empirically, frequency of price changes is robustly informative, in line with models of price rigidities. Other moments are insignificant, or become insignificant when non-pricing moments are included. No pricing moment is a sufficient statistic. Our theoretical analysis, focused on the ratio of kurtosis over frequency of price changes in a quantitative menu cost model, finds an ambiguous relationship of the ratio with monetary non-neutrality. This result stands in contrast with existing theoretical results. We explore which assumptions explain the discrepancy, aligning theoretical and empirical results.
Keywords: Price-Setting, Calvo Pricing, Menu Cost, Micro Moments, Sufficient Statistics
JEL Classification: E13, E31, E32
Suggested Citation: Suggested Citation