Download This PaperModels of Price Setting and Inflation Dynamics
42 Pages Posted: 22 May 2024
Date Written: May 21, 2024
Abstract
We review models of nominal price adjustment based on optimizing or near-optimal behavior, including menu cost models, generalized hazard function models and models of frictional decisions. We also discuss the role of real rigidities and assess the models’ success in explaining retail microdata and inflation dynamics.
Keywords: sticky prices, nominal rigidities, state-dependent prices, inflation, menu costs, control costs, rational inattention
JEL Classification: E31, E71
Suggested Citation: Suggested Citation
Costain, James S. and Nakov, Anton A., Models of Price Setting and Inflation Dynamics (May 21, 2024). Banco de Espana Occasional Paper No. 2416, Available at SSRN: https://ssrn.com/abstract=4837383
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