Aggregate Price Stickiness

We accomplish two tasks to characterize aggregate price stickiness in this paper. First, we endogenize beta , the fraction of the firms keeping their price unchanged following a money supply shock in the near-rationality model (Akerlof and Yellen, 1985) by introducing a distribution of price-adjustment barriers among the firms into the near-rationality model. Second, as ? can be considered an indicator of aggregate price stickiness by its definition, the endogenized ? enables us to characterize aggregate price stickiness by studying its properties. We show that: (1) ...; (2)...; and (3) the possibility of multiple equilibrium values of ?, where .. is the fraction change in money supply.