Andres Drenik, Cloumbia University – Københavns Universitet

Videresend til en ven Resize Print kalender-ikon Bookmark and Share

Økonomisk Institut > Kalender > Institutseminarer EPRU > Andres Drenik, Cloumbi...

Andres Drenik, Cloumbia University

"Price Setting Under Uncertainty About Inflation"

Abstract

We use the manipulation of inflation statistics that occurred in Argentina starting in 2007 to test the relevance of informational frictions in price setting. We estimate that the manipulation of statistics had associated a higher degree of price dispersion. This effect
is analyzed in the context of a quantitative general equilibrium model in which firms use information about the inflation rate to set prices. Consistent with empirical evidence, we find that monetary policy becomes more effective with less precise information about inflation. Not reporting accurate measures of the CPI entails significant welfare losses, especially in economies with volatile monetary policy.

Download paper