We examine the responses of prices and inflation to monetary shocks in an inventory-theoretic model of money demand. We …

with sticky goods prices. If prices are held fixed for at least one year, risk aversion is high, and preferences are …

large class of theories: (i) pricing-to-market, (ii) positive correlation of aggregate real export and import prices, (iii … elasticity of international trade flows. The behavior of quantities is shown to be on par with standard international business … cycle theories that, in contrast to our model, assume low intrinsic elasticity of substitution between domestic and foreign …

in option prices. Consumption and dividends remain smooth, and the model is consistent with salient features of …

nominal shocks in an economy with sticky goods prices. A key implication of this explanation is that if goods have differing …

realizations occur. The information lag also produces prices that do not respond much to current monetary realizations. …

crucially on the choice of price series used to measure relative prices and on the choice of trade partner. The relation is … stronger when we measure relative prices using producer prices rather than consumer prices. The relation is stronger the more …

The conventional wisdom is that monetary shocks interact with sticky goods prices to generate the observed volatility … and persistence in real exchange rates. We investigate this conventional wisdom in a quantitative model with sticky prices …