Sticky prices, no menu costs
By: David Bowman.
Series: International finance discussion papers ;; no. 743; International finance discussion papers (Online) ;; no. 743.
Publisher: Federal Reserve Board
Published: 2002
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "A model that contains no costs to changing prices but in which prices do not respond to nominal shocks is presented.  In models that do not feature superneutrality of money flexible price equilibria will allow certain types of monetary shocks to affect the real economy.  Sticky price behavior may in fact be better at protecting the real economy from the effects of monetary shocks in such environments.  This point is demonstrated in a standard monetary model with liquidity effects.  An equilibrium in which sticky prices are supported without menu costs is then constructed.  In equilibrium firms choose to keep prices fixed in response to nominal shocks because doing so provides a service to their customers, increasing profits by expanding the customer base"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 10/8/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.