TY  - JOUR
AU  - Ball,Laurence
AU  - Mankiw,N. Gregory
TI  - Asymmetric Price Adjustment and Economic Fluctuations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4089
PY  - 1994
Y2  - May 1994
UR  - http://www.nber.org/papers/w4089
L1  - http://www.nber.org/papers/w4089.pdf
N1  - Author contact info:
Laurence M. Ball
Department of Economics
Johns Hopkins University
Baltimore, MD 21218
Tel: 410/516-7605
Fax: 410/516-7600
E-Mail: lball@jhu.edu

N. Gregory Mankiw
Department of Economics
Littauer 223
Harvard University
Cambridge, MA  02138
Tel: 617/495-4301
Fax: 617/495-7730
E-Mail: ngmankiw@fas.harvard.edu
AB  - This paper considers a possible explanation for asymmetric adjustment of nominal prices. We present a menu-cost model in which positive trend inflation causes firms' relative prices to decline automatically between price adjustments. In this environment, shocks that raise firms' desired prices trigger larger price responses than shocks that lower desired prices. We use this model of asymmetric adjustment to address three issues in macroeconomics: the effects of aggregate demand, the effects of sectoral shocks, and the optimal rate of inflation.
ER  -