Title: Price Stickiness Heterogeneity and Equilibrium Determinacy
Presenter: Woongyong Park (Seoul National University)
Discussant: Willem van Zandweghe (Federal Reserve Bank of Cleveland)
Zoom link to the seminar:
I look forward to seeing you at the seminar.
KAEA-VSS Empirical Macro-Finance Organizers
Yoosoon Chang, Soojin Jo, Minchul Shin
Monetary policy can achieve equilibrium determinacy with considerably weak responses to inflation under price stickiness heterogeneity. The result holds in a sticky-price model with the constant elasticity-of-substitution aggregator and no trend inflation, and with a variable elasticity-of-substitution aggregator and historical trend inflation. The evidence in favor of the view that the US economy was subject to self-fulfilling expectations-driven fluctuations in the pre-Volcker period and the systematic shift in monetary policy was crucial in subsequent stabilization of inflation appears much weaker through the lens of price stickiness heterogeneity than previously concluded in the literature under price stickiness homogeneity.
Co-author: Jae Won Lee (Seoul National University)
Keywords: Heterogeneity in Price Stickiness, Equilibrium Determinacy, Sectoral Relative Price Dispersion, Monetary Policy, Great Inflation