In a SVAR model of the US, the response of the relative price of durables to a monetary contraction is either flat or mildly positive. It significantly falls only if narrowly defined as the ratio between new-house and nondurables prices. These findings are rationalized via the estimation of a...

We study discretionary equilibrium in the Calvo pricing model for a monetary authority that chooses the money supply, producing three main contributions. First, price‐adjusting firms have a unique equilibrium price for a broad range of parameterizations, in contrast to earlier results for the...