Small Menu Costs and Large Business Cycles: An Extension of Mankiw Model
نویسندگان
چکیده
Using a multi-period general equilibrium model, this paper extends the results of Mankiw (1991) by showing that monopolistically competitive firms may require ‘relatively large’ menu costs to dissuade them from changing prices in response to an aggregate demand shock that is perceived to be permanent. Thus, “small” menu costs may be insufficient to contribute to large business cycles. JEL Classification: E3
منابع مشابه
Small Menu Costs and Large Business Cycles: an Extension of the Mankiw Model
Using a multi-period general equilibrium model, this paper can be used to enhance classroom presentation of new Keynesian theory by extending the results of Mankiw (1991) by showing that monopolistically competitive firms may require 'relatively large' menu costs to dissuade them from changing prices in response to an aggregate demand shock that is perceived to be permanent. Thus, "small" menu ...
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