Monetary Non-Neutrality in a Multi-Sector Menu Cost Model

  title={Monetary Non-Neutrality in a Multi-Sector Menu Cost Model},
  author={Emi Nakamura and J{\'o}n Bjarni Steinsson},
  journal={Econometric Modeling: Macroeconomics eJournal},
Empirical evidence suggests that as much as one-third of the U.S. business cycle is due to nominal shocks. We calibrate a multisector menu cost model using new evidence on the cross-sectional distribution of the frequency and size of price changes in the U.S. economy. We augment the model to incorporate intermediate inputs. We show that the introduction of heterogeneity in the frequency of price change triples the degree of monetary non-neutrality generated by the model. We furthermore show… 

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