Monetary Policy and Price Responsiveness to Aggregate Shocks under Rational Inattention

Abstract

This paper studies a general equilibrium model that is consistent with recent empirical evidence showing that the U.S. price level and in‡ation are much more responsive to aggregate technology shocks than to monetary policy shocks. Speci…cally, we show that the fact that aggregate technology shocks are more volatile than monetary policy shocks induces …rms… (More)

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Cite this paper

@inproceedings{Paciello2012MonetaryPA, title={Monetary Policy and Price Responsiveness to Aggregate Shocks under Rational Inattention}, author={Luigi Paciello and Pierpaolo Benigno and Martin Eichenbaum and Christian Hellwig and Francesco Lippi}, year={2012} }