Dixon, Huw; Pompermaier, Alberto - Department of Economics and Related Studies, University …
the traded sector. We compare the short-run impact of menu costs on the economy and also the size of menu costs needed to … are of a similar magnitude, nominal rigidity can occur for much smaller menu costs than in the closed economy case. Hence … we argue that menu costs and the resultant nominal rigidities are more likely to be important in an open economy. …
