Working Paper: CEPR ID: DP6961
Authors: Bartosz Makowiak; Frank Smets
Abstract: We review the recent literature that studies new, detailed micro data on prices. We discuss implications of the new micro data for macro models. We argue that the new micro data are helpful for macro models, but not decisive. There is no simple mapping from the frequency of price changes in micro data to impulse responses of prices and quantities to shocks. We discuss ideas that promise to deliver macro models matching the impulse responses seen in macro data while being broadly in line with micro data.
Keywords: micro price data; models of price setting; real effects of nominal shocks; sticky prices
JEL Codes: E3; E5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| micro price data (D49) | macroeconomic outcomes (E66) |
| higher inflation (E31) | more frequent price adjustments (D49) |
| frequency of price changes (E30) | speed of impulse responses of prices to macro shocks (E39) |
| micro price data (D49) | estimated parameters of the new Keynesian Phillips curve (C54) |