Institutional Affiliation: University of Michigan
|Price Stickiness along the Income Distribution and the Effects of Monetary Policy|
with , : w24654
We document that the prices of the goods consumed by high-income households are more sticky and less volatile than those of the goods consumed by middle-income households. This suggests that monetary shocks can have distributional consequences by affecting the relative prices of the goods consumed at different points on the income distribution. We use a Factor-Augmented VAR (FAVAR) model to show that, following a monetary policy shock, the estimated impulse responses of high-income households' consumer price indices are 22% lower than those of the middle-income households. We then evaluate the macroeconomic implications of our empirical findings in a quantitative New-Keynesian model featuring households that are heterogeneous in their income and consumption patterns, and sectors that are h...
Published: Javier Cravino & Ting Lan & Andrei A. Levchenko, 2018. "Price stickiness along the income distribution and the effects of monetary policy," Journal of Monetary Economics, . citation courtesy of