Sticky Prices and Monetary Policy: Evidence from Disaggregated US Data

2009/02/01 by Jean Boivin, Marc P Giannoni, Marc Giannoni +1 · 442 citations
Economics, Econometrics and Finance · #Econometrics #Economic theories and models #Economics #Flexibility (engineering) #Macroeconomic model #Macroeconomics #Market Dynamics and Volatility #Microeconomics #Monetary Policy and Economic Impact #Monetary economics #Monetary policy #Price setting #Structural vector autoregression #Vector autoregression

paper · doi:10.1257/aer.99.1.350

published in American Economic Review 99(1), 350-384 (American Economic Association)

openalex publication_date 2009/02/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/27

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. (JEL E13, E31, E32, E52)

Citations

• Optimal Sticky Prices under Rational Inattention

Cited by

• Optimal Sticky Prices under Rational Inattention
• Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach
• Costly Information, Planning Complementarities, and the Phillips Curve
• Integrating Sticky Prices and Sticky Information
• Imperfect information, composition of demand shocks, and the flattening of the Phillips curve
• What Drives Oil Prices? Emerging Versus Developed Economies
• Unobservable Selection and Coefficient Stability: Theory and Evidence
• Sectoral Inflation Persistence, Market Concentration and Imperfect Common Knowledge
• Relative Goods' Prices, Pure Inflation, and The Phillips Correlation
• A daily fever curve for the Swiss economy. [europepmc]

Related

• A Tale of Two Rigidities: Sticky Prices in a Sticky‐Information Environment
• Non-Linearities, State-Dependent Prices and the Transmission Mechanism of Monetary Policy
• Integrating Sticky Prices and Sticky Information
• Costly Information, Planning Complementarities, and the Phillips Curve
• Imperfect Common Knowledge, Staggered Price Setting, and the Effects of Monetary Policy