Research

Research Papers

• Sectoral Heterogeneities in Nominal Price Rigidity and Returns to Scale (with Atsuyoshi Morozumi), Job Market Paper

Abstract: Previous research on price-setting has shown that the degree of nominal price rigidity differs substantially across sectors. This paper proposes returns to scale as a key determinant of this sectoral heterogeneity in price rigidity. We develop a multi-sector menu cost model with heterogeneity in returns to scale and sectoral idiosyncratic shocks, and show analytically that a sector with higher returns to scale is associated with larger price rigidity. Numerical experiments using estimated returns to scale for US manufacturing sectors suggest that the effect of returns to scale is quantitatively large. We also provide empirical evidence consistent with the theoretical prediction.

• Does Heterogeneity in Price Stickiness Really Matter for Monetary Non-neutrality?

Abstract: Previous research has suggested that sectoral heterogeneity in nominal price rigidities increases the size and persistence of the real effects of monetary shocks. This paper provides theoretical foundations that this finding is sensitive to the consideration of the multi-dimensionality of sectoral heterogeneity. Considering both heterogeneity in returns to scale and heterogeneity in price stickiness, the stronger impact previously implied by the latter heterogeneity is likely to be weakened. The interaction between these two dimensions of heterogeneity matters through the slope of the Phillips curve. The quantitative importance of these interactions is examined using sub-sectoral data within the US manufacturing sector.

Work in Progress

• Macroprudential Policy and Bank Profitability