蝌蚪网

This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. 蝌蚪网
  3. 蝌蚪网 Review: Insights
  4. Forthcoming Articles
  5. Substitution Bias and Fixed-Weight Price Indices in Time-Dependent Pricing Models

蝌蚪网 Review: Insights

ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)

Substitution Bias and Fixed-Weight Price Indices in Time-Dependent Pricing Models

  • Lawrence J. Christiano
  • Martin Eichenbaum
  • Benjamin K. Johannsen
蝌蚪网 Review: Insights (Forthcoming)

Abstract

This paper compares measured inflation in true and fixed-weight price indices. We construct model-based inflation measures in time-dependent pricing models that are analogous to measures of inflation in the data, e.g., the Consumer Price Index. In the standard new Keynesian model, when inflation rises rapidly, the differences between inflation in those indices and true price indices are increasing in the degree of price stickiness and the elasticity of substitution across goods. For commonly used parameter values, those differences are large and persistent for increases in inflation of the size seen after 2020 in the U.S.

Downloads