Quarterly Journal of Economics Vol. 102 No. 4 1987

Menu Costs and the Neutrality of Money

Andrew S. Caplin^1,2,3; Daniel F. Spulber^1,2,3

¹ University of Southern California · ² National Bureau of Economic Research · ³ Princeton University

Abstract

A model of endogenous price adjustment under money growth is presented. Firms follow (s,S) pricing policies, and price revisions are imperfectly synchronized. In the aggregate, price stickiness disappears, and money is neutral. The connection between firm price adjustment and relative price variability in the presence of monetary growth is also investigated. The results contrast with those obtained in models with exogenous fixed timing of price adjustment.

DOI

10.2307/1884277

Volume

102

Issue

4

Pages

703

Sources

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