IDEAS home Printed from https://ideas.repec.org/a/ecb/ecbrbu/20190059.html
   My bibliography  Save this article

Price and Wage Setting when Accurate Decisions Are Costly: Implications for Monetary Policy Transmission

Author

Listed:
  • Costain, James
  • Nakov, Anton

Abstract

Recent low inflation is motivating new research to better characterise how individual firms and workers set prices and wages. In this article, we describe a new approach which emphasises that the costs of decision-making may limit the precision of price and wage changes. As well as making better sense of price and wage changes in microeconomic data, this new approach also strikes a middle ground between two leading models of monetary policy transmission, improving our quantitative understanding of the short-run effects of monetary policy on output and the short-run trade-off between inflation and unemployment. JEL Classification: E31, D81, C73

Suggested Citation

  • Costain, James & Nakov, Anton, 2019. "Price and Wage Setting when Accurate Decisions Are Costly: Implications for Monetary Policy Transmission," Research Bulletin, European Central Bank, vol. 59.
    • Handle: RePEc:ecb:ecbrbu:2019:0059:
    Note: 3308697
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/economic-research/resbull/2019/html/ecb.rb190627~a02bbe4f70.en.html
    Download Restriction: no
    File URL: https://www.ecb.europa.eu//pub/economic-research/resbull/2019/html/ecb.rb190627~a02bbe4f70.en.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dedola, Luca & Gautier, Erwan & Nakov, Anton & Santoro, Sergio & De Veirman, Emmanuel & Henkel, Lukas & Fagandini, Bruno, 2023. "Some implications of micro price-setting evidence for inflation dynamics and monetary transmission," Occasional Paper Series 321, European Central Bank.

    More about this item

    Keywords

    control costs; state-dependent adjustment; Sticky prices; sticky wages;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbrbu:2019:0059:. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.