Sticky prices and monetary policy
Subtitle: evidence from disaggregated u.s. data
By: Jean Boivin, Marc Giannoni, Ilian Mihov.
Contributors: Mihov, Ilian.; Boivin, Jean.; Giannoni, Marc.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 12824; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12824.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "This paper disentangles fluctuations in disaggregated prices due to macroeconomic and sectoral conditions using a factor-augmented vector autoregression estimated on a large data set.  On the basis of this estimation, we establish eight facts: (1) Macroeconomic shocks explain only about 15% of sectoral inflation fluctuations; (2) The persistence of sectoral inflation is driven by macroeconomic factors; (3) While disaggregated prices respond quickly to sector-specific shocks, their responses to aggregate shocks are small on impact and larger thereafter; (4) Most prices respond with a significant delay to identified monetary policy shocks, and show little evidence of a "price puzzle," contrary to existing studies based on traditional VARs; (5) Categories in which consumer prices fall the most following a monetary policy shock tend to be those in which quantities consumed fall the least; (6) The observed dispersion in the reaction of producer prices is relatively well explained by the degree of market power; (7) Prices in sectors with volatile idiosyncratic shocks react rapidly to aggregate monetary policy shocks; (8) The sector-specific components of prices and quantities move in opposite directions"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 3/22/2007.

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