TY  - JOUR
AU  - Bils,Mark
AU  - Klenow,Peter J.
AU  - Malin,Benjamin A.
TI  - Reset Price Inflation and the Impact of Monetary Policy Shocks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14787
PY  - 2009
Y2  - March 2009
UR  - http://www.nber.org/papers/w14787
L1  - http://www.nber.org/papers/w14787.pdf
N1  - Author contact info:
Mark Bils
Department of Economics
University of Rochester
Rochester, NY 14627
Tel: 585/275-0488
Fax: 585/256-2309
E-Mail: bils@troi.cc.rochester.edu

Peter J. Klenow
Department of Economics
579 Serra Mall
Stanford University
Stanford, CA  94305-6072
Tel: 650/725-8169
Fax: NA
E-Mail: Pete@Klenow.net

Benjamin Malin
Federal Reserve Board of Governors
Mail Stop 97
21st and C St., NW
Washington, D.C. 20551
E-Mail: benjamin.a.malin@frb.gov
AB  - A standard state-dependent pricing model generates little monetary non-neutrality. Two ways of generating more meaningful real effects are time-dependent pricing and strategic complementarities. These mechanisms have telltale implications for the persistence and volatility of "reset price inflation." Reset price inflation is the rate of change of all desired prices (including for goods that have not changed price in the current period). Using the micro data underpinning the CPI, we construct an empirical measure of reset price inflation. We find that time-dependent models imply unrealistically high persistence and stability of reset price inflation. This discrepancy is exacerbated by adding strategic complementarities, even under state-dependent pricing. A state-dependent model with no strategic complementarities aligns most closely with the data.
ER  -