A Note on Price Asymmetry Using a Monetary Model

Pablo L. Schiaffino¹, Juan Pablo Pinasco²

¹Facultad de Ciencias Económicas, Universidad de Palermo, Buenos Aires, Argentina.
²Facultad de Ciencias Exactas, Universidad de Buenos Aires, Buenos Aires, Argentina.

DOI: 10.4236/tel.[phone]                

Abstract

In this paper we present a macroeconomic foundation of downward money price inflexibility based on classical Monetary Economics. We show that under the principle of risk aversion and the neutral money axiom, our model derives an endogenous asymmetric price response as prices adjust more rapidly when they go upward than downward. This asymmetry does not disappear; on the contrary, it is increasing in time.

Keywords

Price Asymmetry, Monetary Model, Sticky Prices, Classical Economics

Conflicts of Interest

The authors declare no conflicts of interest.

References

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