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Re-pricing avalanches

November 18, 2020 @ 9:45 am - 11:00 am

Speaker: Jose A. Scheinkman (Columbia)
Title: Re-pricing avalanches
Abstract: Monthly aggregate price changes exhibit chronic fluctuations but the aggregate shocks that drive these fluctuations are often elusive.  Macroeconomic models often add stochastic macro-level shocks such as technology shocks or monetary policy shocks to produce these aggregate fluctuations. In this paper, we show that a state-dependent  pricing model with a large but finite number of firms is capable of generating large fluctuations in the number of firms that adjust prices in response to an idiosyncratic shock to a firm’s cost of price adjustment.  These fluctuations, in turn, cause fluctuations  in aggregate price changes even in the absence of aggregate shocks. (Joint work with Makoto Nirei.)


November 18, 2020
9:45 am - 11:00 am
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