Guido Menzio is a consultant at the Federal Reserve Bank of Minneapolis, a professor of economics at the University of Pennsylvania, and a research associate at the National Bureau of Economic Research. He has also taught economics at Princeton University and was a National Fellow at the Hoover Institution, Stanford University. Guido received his M.A. and Ph.D. in economics from Northwestern University. In 2015 he was the recipient of the Carlo Alberto Medal for Best Italian Economist Under 40.
Guido’s work has been published in several journals, including the Journal of Political Economy, American Economic Review, Journal of Economic Theory, Journal of Monetary Economics, and Review of Economic Dynamics. His latest research focuses on business cycle fluctuations, with a special focus on unemployment, vacancies, and wages.
Why do some sellers set nominal prices that apparently do not respond to changes in the aggregate price level? In many models, prices are sticky by assumption; here it is a result. We use search theory, with two consequences: prices are set in dollars, since money is the medium of exchange; and equilibrium implies a nondegenerate price distribution. When the money supply increases, some sellers may keep prices constant, earning less per unit but making it up on volume, so profit stays constant. The calibrated model matches price-change data well. But, in contrast with other sticky-price models, money is neutral.