The failure to predict the surge in inflation in 2021 raises questions about whether we are better equipped to … anticipate a future decline in inflation. What tools do we intend to use for predicting the trajectory of inflation? Are we still … primarily relying on survey data regarding inflation expectations, and are we still employing a Calvo-type structure to model …

changes does not change much with inflation and does not react much to aggregate shocks; (vi) changes in inflation are mostly … consistent with the predictions of a menu cost model in a low inflation environment where idiosyncratic shocks are a more …

We empirically identify the effect of inflation on relative price distortions, using a novel identification approach … unobserved shocks. Using the micro price data underlying the U.K. CPI, we document that suboptimally high (or low) inflation is … associated with distortions in relative prices. At the level of individual products, the marginal effect of inflation on relative …

. Aggregating the model in closed form, we show that it delivers radically different predictions for the optimal inflation rate than … canonical sticky price models featuring homogenous firms: (1) the optimal steady-state inflation rate generically differs from … zero and (2) inflation optimally responds to productivity disturbances. Using micro data from the US Census Bureau to …

, we demonstrate that effort dampens the response of inflation to exogenous shocks. …

dynamics of inflation implied by macroeconomic data, the model needs to assume an average duration of price contracts which is …