information frictions

Firm Uncertainty Cycles and the Propagation of Nominal Shocks

JEL codes: 
E50
Version Date: 
Feb 2017
Author/s: 
Abstract: 

Firms operate in constantly changing and uncertain environments. We argue that firm uncertainty is a key determinant of pricing decisions, and that it affects the propagation of nominal shocks in the economy. For this purpose, we develop a price-setting model with menu costs and imperfect information about idiosyncratic productivity.

Report file: 
Download the paper (1.77 MB)