کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
5066935 | 1476804 | 2013 | 11 صفحه PDF | دانلود رایگان |
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- We examine heterogeneity in sectoral inflation dynamics and confront this heterogeneity with theoretical models of price setting.
- There is little evidence that the size and speed of price responses to macroeconomic shocks are lower in sectors with a volatile idiosyncratic component.
- Sectors with sticky prices react less strongly and less quickly to macroeconomic shocks.
- This is more in line with multi-sector sticky-price models than with rational inattention.
This paper derives stylised facts on sectoral inflation dynamics and confronts these facts with two popular theoretical models of price setting. Based on sectoral price responses to macroeconomic shocks estimated from an approximate factor model, we find that the frequency of price changes explains a relevant share of the cross-sectional variation of the speed and size of responses. Moreover, there is little evidence that the volatility of sectoral inflation due to idiosyncratic shocks dampens the size and speed of the responses to macroeconomic shocks. These findings support a multi-sector model with sticky prices rather than a rational-inattention model. We derive the results from different modelling and sampling decisions proposed in the literature, and we find that the explanatory power of the frequency of price changes for the speed of response to a macroeconomic shock proves robust in the face of these decisions. Other results are sensitive with respect to the choice of the factor model and the treatment of outliers.
Journal: European Economic Review - Volume 64, November 2013, Pages 384-394