We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more...

In this paper we analyse a new Phillips curve (NPC) model and demonstrate that (i) frictional growth, i.e. the interplay of wage-staggering and money growth, generates a nonvertical NPC in the long-run, and (ii) the Phillips curve (PC) shifts with productivity growth. On this basis we estimate a...

In this paper we do a statistical analysis of the Mexican Consumer Price Index microdata set to characterize the rigidities of the price setting process in the different sectors of the Mexican economy. The microdata set goes from July 2002 to December 2009. Broadly, results show that there...

We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility gains from price decreases of equal magnitude. Price...

Empirical research on the degree and stability of inflation persistence in the US has produced mixed results: some suggest high and unchanged persistence during the last few decades, while others argue in favor of a decline in persistence since the early 1980s. We contribute to this debate by...

Traditionally, models of economic decision-making assume that individuals are rational and emotionless. This chapter argues that the neglect of emotion in economic models explains their inability to predict important aspects of the labor market. We focus on one example: the scarcity of nominal...

The recent shift to remote work raised the amenity value of employment. As compensation adjusts to share the amenity-value gains with employers, wage-growth pressures moderate. We find empirical support for this mechanism in the wage-setting behavior of U.S. employers, and we develop novel...

This paper provides evidence on price rigidity at the product- and firm-level in Norway. A strong within-firm synchronization is found supporting the theory of economies of scope in menu costs. The industry synchronization effects are found to be small suggesting that firms either have some...

The frequencies at which prices and wages are adjusted, interpreted as price and wage flexibility, are key elements in workhorse models used for policy analysis. Yet, there is little evidence regarding the relationship between these two sources of nominal rigidities. Using two large and highly...

This paper investigates the link between product quality and price setting for central processing units (CPUs). Using thousands of price quotes from a popular price-comparison website, we find that market fundamentals, such as the number of sellers, median price, share of convenient prices and...