← Search

American Economic Review Vol. 99 No. 1 2009

Sticky Prices and Monetary Policy: Evidence from Disaggregated US Data

Jean Boivin1; Marc Giannoni2; Ilian Mihov3

1 HEC Montréal, 3000, chemin de la Côte-Sainte-Catherine, Montréal, Québec, Canada H3T 2A7, Center for Interuniversity Research and Analysis in Organizations (CIRANO), and National Bureau of Economic Research (NBER). · 2 Columbia Business School, 824 Uris Hall, 3022 Broadway, New York, NY 10027, Center for Economic Policy Research (CEPR), CIRANO, and NBER. · 3 INSEAD, 1 Ayer Rajah Avenue, Singapore 138676, and CEPR.

Abstract

This paper shows that the recent evidence that disaggregated prices are volatile does not necessarily challenge the hypothesis of price rigidity used in a large class of macroeconomic models. We document the effect of macroeconomic and sectoral disturbances by estimating a factor-augmented vector autoregression using a large set of macroeconomic indicators and disaggregated prices. Our main finding is that disaggregated prices appear sticky in response to macroeconomic and monetary disturbances, but flexible in response to sector-specific shocks. The observed flexibility of disaggregated prices reflects the fact that sector-specific shocks account on average for 85 percent of their monthly fluctuations.

DOI
10.1257/aer.99.1.350
Volume
99
Issue
1
Pages
350-384
Language
en
Sources
openalex bibtex:phds-export.bib crossref

Cite