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Menu Costs and the Neutrality of Money

Andrew S. Caplin and Daniel F. Spulber
The Quarterly Journal of Economics
Vol. 102, No. 4 (Nov., 1987), pp. 703-726
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/1884277
Page Count: 24
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Menu Costs and the Neutrality of Money
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Abstract

A model of endogenous price adjustment under money growth is presented. Firms follow (s,S) pricing policies, and price revisions are imperfectly synchronized. In the aggregate, price stickiness disappears, and money is neutral. The connection between firm price adjustment and relative price variability in the presence of monetary growth is also investigated. The results contrast with those obtained in models with exogenous fixed timing of price adjustment.

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