NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Ting Lan

Department of Economics
University of Michigan
611 Tappan Street
Ann Arbor, MI 48109

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NBER Working Papers and Publications

May 2018Price Stickiness along the Income Distribution and the Effects of Monetary Policy
with Javier Cravino, Andrei A. Levchenko: w24654
We document that the prices of the goods consumed by high-income households are more sticky and less volatile than those of the goods consumed by middle-income households. This suggests that monetary shocks can have distributional consequences by affecting the relative prices of the goods consumed at different points on the income distribution. We use a Factor-Augmented VAR (FAVAR) model to show that, following a monetary policy shock, the estimated impulse responses of high-income households' consumer price indices are 22% lower than those of the middle-income households. We then evaluate the macroeconomic implications of our empirical findings in a quantitative New-Keynesian model featuring households that are heterogeneous in their income and consumption patterns, and sectors that are h...

Published: Javier Cravino & Ting Lan & Andrei A. Levchenko, 2018. "Price stickiness along the income distribution and the effects of monetary policy," Journal of Monetary Economics, .

 
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