TY - JOUR AU - Boivin,Jean AU - Giannoni,Marc AU - Mihov,Ilian TI - Sticky Prices and Monetary Policy: Evidence from Disaggregated U.S. Data JF - National Bureau of Economic Research Working Paper Series VL - No. 12824 PY - 2007 Y2 - January 2007 UR - http://www.nber.org/papers/w12824 L1 - http://www.nber.org/papers/w12824.pdf N1 - Author contact info: Jean Boivin Bank of Canada 234 Wellington Street Ottawa Ontario K1A 0G9 Canada Tel: 613-782-8278 E-Mail: jboivin@bankofcanada.ca Marc Giannoni Federal Reserve Bank of New York Macroeconomic & Monetary Studies Function Research and Statistics Group 33 Liberty Street New York, NY 10045-0001 Tel: 212-720-6518 Fax: 212-720-1844 E-Mail: mg2190@columbia.edu Ilian Mihov INSEAD 1 Ayer Rajah Avenue Singapore 138676 Singapore E-Mail: ilian.mihov@insead.edu AB - This paper disentangles fluctuations in disaggregated prices due to macroeconomic and sectoral conditions using a factor-augmented vector autoregression estimated on a large data set. On the basis of this estimation, we establish eight facts: (1) Macroeconomic shocks explain only about 15% of sectoral inflation fluctuations; (2) The persistence of sectoral inflation is driven by macroeconomic factors; (3) While disaggregated prices respond quickly to sector-specific shocks, their responses to aggregate shocks are small on impact and larger thereafter; (4) Most prices respond with a significant delay to identified monetary policy shocks, and show little evidence of a "price puzzle," contrary to existing studies based on traditional VARs; (5) Categories in which consumer prices fall the most following a monetary policy shock tend to be those in which quantities consumed fall the least; (6) The observed dispersion in the reaction of producer prices is relatively well explained by the degree of market power; (7) Prices in sectors with volatile idiosyncratic shocks react rapidly to aggregate monetary policy shocks; (8) The sector-specific components of prices and quantities move in opposite directions. ER -