Menu Costs and Phillips Curves

  title={Menu Costs and Phillips Curves},
  author={Mikhail Golosov and Robert E. Lucas, Jr.},
  journal={Journal of Political Economy},
  pages={171 - 199}
This paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation. Sellers can change price only by incurring a real “menu cost.” We calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new U.S. data set of individual prices due to Klenow and Kryvtsov. The prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well… 
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