Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/197669
Authors: 
Paulie, Charlotte
Year of Publication: 
2018
Series/Report no.: 
Working Paper 2018:16
Abstract: 
Using detailed Swedish micro data on prices and costs, this paper documents a decrease in the dispersion of changes in prices and markups following the introduction of an official inflation target of 2 percent. Using a structural model to decompose the change in the price-change distribution by potential explanatory factors, about 63 percent of the decrease in the price-change dispersion can be attributed to a decrease in the cross-sectional variance of inflation expectations. The lower dispersion of inflation expectations results in a lower markup dispersion and a welfare gain equivalent to a 0.79 percent increase in consumption.
Subjects: 
inflation targeting
price setting
misallocation
welfare
JEL: 
D84
E52
L11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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