Journal of Monetary Economics 2020 DOI: 10.1016/j.jmoneco.2019.03.007 View full text
Viacheslav Sheremirov

Abstract: In macroeconomic models, the level of price dispersion-which is typically approximated through its relationship with inflation-is a central determinant of welfare, the cost of business cycles, the optimal rate of inflation, and the tradeoff between inflation and output stability. While the comovement of price dispersion and inflation implied by standard models is positive, I find that in the data, it is negative. This is due to transitory price changes (sales): if sales are removed from the data, the comovemen…

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