Monetary Economics Program meeting.

• Position: Bureau News

The NBER's Monetary Economics Program met in Cambridge on April 21. Jean Boivin, NBER and Columbia Business School, and John Leahy, NBER and New York University, organized this program:

Bartosz Mackowiak and Mirko Wiederholt, Humboldt University Berlin, "Optimal Sticky Prices under Rational Inattention"

Discussant: Laura Veldkamp, New York University

George-Marios Angeletos, MIT and NBER, and Alessandro Pavan, Northwestern University, "Efficient Use of Information and Welfare Analysis in Economies with Complementarities and Asymmetric Information"

Discussant: Hyun Shin, Princeton University

Lars E.O. Svensson and Noah Williams, Princeton University and NBER, "Monetary Policy with Model Uncertainty: Distribution Forecast Targeting"

Discussant: Alexei Onatski, Columbia University

Frederic S. Mishkin, Columbia University and NBER, and Niklas Westelius, Hunter College, "Inflation Band Targeting and Optimal Inflation Contracts"

Discussant: John Williams, Federal Reserve Bank of San Francisco

Jordi Gali, MIT and NBER, and Tommaso Monacelli, IGIER, "Optimal Monetary and Fiscal Policy in a Currency Union"

Discussant: Paolo Pesenti, Federal Reserve Bank of New York

Virgiliu Midrigan, Ohio State University, "Menu Costs, Multi-Product Firms, and Aggregate Fluctuations"

Discussant: Ariel Burstein, University of California, Los Angeles

In standard sticky price models, frequent and large price changes imply that the aggregate price level responds quickly to nominal shocks. Mackowiak and Wiederholt present a model in which price setting firms optimally decide what to pay attention to, subject to a constraint on information flow. When idiosyncratic conditions are more variable or more important than aggregate conditions, then firms pay more attention to idiosyncratic conditions than to aggregate conditions. When the authors calibrate the model to match the large average absolute size of price changes observed in the data, prices react fast and by large amounts to idiosyncratic shocks, but prices react only slowly and by small amounts to nominal shocks. Nominal shocks have persistent real effects. The authors use their model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms' environment.

Angeletos and Pavan analyze equilibrium and welfare for a tractable class of economies with externalities, strategic complementarity or substitutability, and incomplete information. They first characterize the equilibrium...