| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 5057845 | Economics Letters | 2017 | 4 Pages |
Abstract
We revisit Ball and Romer's (1990) canonical model of price setting with menu costs that exhibits multiple equilibria. We show that changes to firms' markups move nominal and real rigidities in opposite directions. Using game-theoretic tools to derive a unique equilibrium, we find that accounting for agents' endogenous adjustment of price expectations further weakens the link between real and nominal rigidities.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Philipp J. König, Alexander Meyer-Gohde,