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On Inflation and Output with CostlyPrice Changes: A Simple Unifying Result

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  • Benabou, R.
  • Konieczny, J.D.
Abstract
We analyze the effect of inflation on the average output of monopolistic firms facing a small fixed cost of changing nominal prices. Using Taylor expansions, we derive a general closed-form solution for the slope of the long-run Phillips curve. This very simple, unifying formula allows us to evaluate and clarify the role of three key factors: the asymmetry of the profit function, the convexity of the demand function, and the discount rate. These partial equilibrium effects remain important components of any general equilibrium model with (s,S) pricing.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Benabou, R. & Konieczny, J.D., 1991. "On Inflation and Output with CostlyPrice Changes: A Simple Unifying Result," Working papers 586, Massachusetts Institute of Technology (MIT), Department of Economics.
    • Handle: RePEc:mit:worpap:586
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    1. repec:bla:econom:v:57:y:1990:i:226:p:201-18 is not listed on IDEAS
    2. Avinash Dixit, 1991. "Analytical Approximations in Models of Hysteresis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 141-151.
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    7. Roland Benabou, 1992. "Inflation and Efficiency in Search Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(2), pages 299-329.
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    More about this item

    Keywords

    inflation ; costs ; prices;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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