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Article
Small Menu Costs and Large Business Cycles: An Extension of the Mankiw Model
Journal of Economics and Economic Education Research (2005)
  • Hiranya K Nath, Sam Houston State University
  • Robert Stretcher, Sam Houston State University
Abstract
Using a multi-period general equilibrium model, this paper extends the results of Mankiw (1991) by showing that monopolistically competitive firms may require ‘relatively large’ menu costs to dissuade them from changing prices in response to an aggregate demand shock that is perceived to be permanent. Thus, “small” menu costs may be insufficient to contribute to large business cycles.
Keywords
  • Menu costs,
  • business cycles,
  • nominal rigidities,
  • general equilibrium
Disciplines
Publication Date
2005
Citation Information
Hiranya K Nath and Robert Stretcher. "Small Menu Costs and Large Business Cycles: An Extension of the Mankiw Model" Journal of Economics and Economic Education Research Vol. 6 Iss. 2 (2005)
Available at: http://works.bepress.com/hiranya_nath/14/