Inflation Dynamics and Customer Markets

In industries in which firms face a high likelihood of financial constraints, inflation is insensitive to changes in financial conditions; in industries where firms have a relatively unfettered access to external finance, by contrast, inflation declines significantly in response to a tightening of financial conditions. Prof. dr. Egon Zakrajšek from the Federal Reserve Board talks about development of a dynamic stochastic general equilibrium model in which firms face financial frictions while setting prices in customer markets.

By: ana / May 15, 2018