Mackowiak, Bartosz; Wiederholt, Mirko - Sonderforschungsbereich 649: Ökonomisches Risiko, … - 2004
In the data, individual prices change frequently and by large amounts. In standard sticky price models, frequent and large price changes imply a fast response of the aggregate price level to nominal shocks. This paper presents a model in which price setting firms optimally decide what to...