Price Rigidity : Microeconomic Evidence and Macroeconomic Implications

  title={Price Rigidity : Microeconomic Evidence and Macroeconomic Implications},
  author={Emi Nakamura and J{\'o}n B Steinsson},
We review recent evidence on price rigidity from themacroeconomics literature and discuss how this evidence is used to inform macroeconomic modeling. Sluggish price adjustment is a leading explanation for the large effects of demand shocks on output and, in particular, the effects of monetary policy on output. A recent influx of data on individual prices has greatly deepenedmacroeconomists’ understanding of individual price dynamics. However, the analysis of these new data raises a host of new… CONTINUE READING
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