Empirical Investigation of a Sufficient Statistic for Monetary Shocks

Abstract

At least one co-author has disclosed additional relationships of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w29490.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Price Setting With Strategic Complementarities as a Mean Field Game

“…The framework developed in this paper is useful to study the dynamics of equilibrium in related problems. In Alvarez, Ferrara, Gautier, LeBihan, and Lippi (2021), we used the equilibrium characterization developed in this paper to analyze the impulse response to shocks with a transitory component, as opposed to the once and for all shocks typically considered in the literature. Such an extension is important to map the model to the data, where nominal interest rate shocks typically feature a mean‐reverting component.…”

Price Setting with Strategic Complementarities as a Mean Field Game

“…The framework developed in this paper is useful to study the dynamics of equilibrium in related problems. In Alvarez, Ferrara, Gautier, LeBihan, and Lippi (2021), we used the equilibrium characterization developed in this paper to analyze the impulse response to shocks with a transitory component, as opposed to the once and for all shocks typically considered in the literature. Such an extension is important to map the model to the data, where nominal interest rate shocks typically feature a mean-reverting component.…”

Some Implications of Micro Price-Setting Evidence for Inflation Dynamics and Monetary Transmission

“…This price selection effect is maximal in a standard menu cost model, such as Golosov and Lucas (2007), and minimal in a standard Calvo model. In two distinct empirical contributions, Alvarez et al (2021) and Gautier, Marx and Vertier (2022) test this theoretical proposition using micro price data and find strong supporting evidence for it. Using both consumer and producer price data for France, Alvarez et al (2021) find that the sectoral price response to a monetary policy shock is proportional to the ratio of kurtosis over frequency of price changes and that both kurtosis and frequency contribute to this result.…”

“…In two distinct empirical contributions, Alvarez et al (2021) and Gautier, Marx and Vertier (2022) test this theoretical proposition using micro price data and find strong supporting evidence for it. Using both consumer and producer price data for France, Alvarez et al (2021) find that the sectoral price response to a monetary policy shock is proportional to the ratio of kurtosis over frequency of price changes and that both kurtosis and frequency contribute to this result. They also show that the relationship is more robust for producer prices than consumer prices.…”