In the last ten years there has been an explosion of empirical work examining price setting behavior at the micro level. The work has in turn challenged existing macro models that attempt to explain monetary nonneutrality, because these models are generally at odds with much of the micro price...

In recent years there has been an abundance of empirical work examining price setting behavior at the micro level. First generation models with price setting rigidities were generally at odds with much of the micro price data. A second generation of models, with fixed costs of price adjustment...

[REVISED AUG 2019]In the last fifteen years there has been an explosion of empirical work examining price setting behavior at the micro level. The work has in turn challenged existing macro models that attempt to explain monetary nonneutrality, because these models are generally at odds with...

Inflation is determined by interaction between real factors and monetary policy. Among the most important real factors are shocks to the supply and demand for different components of the consumption basket. We use an estimated multi-sector New Keynesian model to decompose the behavior of U.S....