The Real Effects of Monetary Shocks: Evidence from Micro Pricing Moments

78 Pages Posted: 3 Sep 2021

See all articles by Gee Hee Hong

Gee Hee Hong

International Monetary Fund (IMF)

Matthew Klepacz

Board of Governors of the Federal Reserve System

Ernesto Pastén

Central Bank of Chile

Raphael Schoenle

Brandeis University

Multiple version iconThere are 2 versions of this paper

Date Written: September 2, 2021

Abstract

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

Suggested Citation

Hong, Gee Hee and Klepacz, Matthew and Pastén, Ernesto and Schoenle, Raphael, The Real Effects of Monetary Shocks: Evidence from Micro Pricing Moments (September 2, 2021). FRB of Cleveland Working Paper No. 21-17, Available at SSRN: https://ssrn.com/abstract=3916363

Gee Hee Hong

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Matthew Klepacz

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Ernesto Pastén

Central Bank of Chile

Publicaciones
Huerfanos 1185
Santiago
Chile

Raphael Schoenle (Contact Author)

Brandeis University ( email )

Waltham, MA 02454
United States

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