Menu costs and Markov inflation: A theoretical revision with new evidence

We revisit a foundational theoretical paper in the menu-cost literature, Sheshinski and Weiss [1983. Optimum pricing policy under stochastic inflation. Review of Economic Studies 50(3), 513–529], one of the few to treat stochastic inflation with persistent deviations from trend. In contrast to the original finding, we show that optimal pricing in this enviro