Price elasticities and demand-side real rigidities in micro data and in macro models

Sarah Lein and Guenter Beck

No 14303, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: High degrees of demand-side real rigidities are able to generate the large monetary non-neutrality found in aggregate data. This paper provides micro-based evidence on the key parameters governing this rigidity using European homescan data. We find strong evidence for demand-side real rigidity, which is, however, significantly lower than that normally assumed in macro models. In a menu-cost model calibrated to our estimates, we show that our estimates are associated with reasonable values for production-side parameters, but they are not able to generate the degree of monetary non-neutrality observed in macro data.

Keywords: Demand curve; Price elasticity; Super-elasticity; Price setting; Real rigidities; Monetary non-neutrality (search for similar items in EconPapers)
JEL-codes: C3 D12 E30 E31 E50 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (17)

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Journal Article: Price elasticities and demand-side real rigidities in micro data and in macro models (2020)
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