The Real Effects of Monetary Shocks: Evidence from Micro Pricing Moments
78 Pages Posted: 3 Sep 2021
Date Written: September 2, 2021
This paper evaluates the informativeness of eight micro pricing moments for monetary non-neutrality. Frequency of price changes is the only robustly informative moment. The ratio of kurtosis over frequency is significant only because of frequency, and insignificant when non-pricing moments are included. Non-pricing moments are additionally informative about monetary non-neutrality, indicating potential omitted variable bias and the inability of pricing moments to serve as sufficient statistics. In contrast to existing theoretical work, this ratio has an ambiguous relationship with monetary non-neutrality in a quantitative menu cost model. We show which modeling ingredients explain this discrepancy, providing guidance on modeling choices.
Keywords: Price-setting, menu cost, micro moments, sufficient statistics
JEL Classification: E13, E31, E32
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