Menu Costs, Relative Prices, and Inflation: Evidence for Canada

Robert A. Amano & R. Tiff Macklem
Authors' note: Subsequent to completing this Working Paper, we realized that the way we constructed the weighted relative prices, ri, as described on page 8, is not invariant to the rate of inflation and this introduces a bias in favour of the menu-cost hypothesis. Preliminary results with a correction to this problem reveal that it affects the quantitative results. We are currently revisiting our empirical analysis more completely to consider the quantitative and qualitative implications...
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