Lecturer in Economics
London School of Economics
Department of Economics
London School of Economics and Political Science
Houghton Street
London
WC2A 2AE
United Kingdom
Tel: +44 207 107 5022
Fax: +44 207 955 6592
Email: k.d.sheedy@lse.ac.uk
Office hour: Mondays 14.00-16.00 in S682
Research interests: Macroeconomics, Monetary Economics, Macroeconometrics.
Sales and Monetary Policy, September 2009 (with Bernardo Guimaraes)
- American Economic Review, (forthcoming), CEPR discussion paper #6940,
CEP discussion paper #887
Abstract: A striking fact about pricing is the prevalence of "sales": large temporary price cuts followed by prices
returning exactly to their former levels. This paper builds a macroeconomic model with a rationale for sales based on firms
facing customers with different price sensitivities. Even if firms can adjust sales without cost, monetary policy has large
real effects owing to sales being strategic substitutes: a firm's incentive to have a sale is decreasing in the number of
other firms having sales. Thus the flexibility seen in individual prices due to sales does not translate into flexibility of
the aggregate price level.
Robustly Optimal Monetary Policy, May 2008 (earlier version entitled Resistance to Persistence: Optimal Monetary Policy Commitment)
- CEP discussion paper #840
Abstract: This paper analyses optimal monetary policy in response to shocks using a model that avoids making
specific assumptions about the stickiness of prices, and thus the nature of the Phillips curve. Nonetheless, certain robust
features of the optimal monetary policy commitment are found. The optimal policy rule is a flexible inflation target which
is adhered to in the short run without any accommodation of structural inflation persistence, that is, inflation which it
is costly to eliminate. The target is also made more stringent when it has been missed in the past. With discretion on the
other hand, the target is loosened to accommodate fully any structural inflation persistence, and any past deviations from
the inflation target are ignored. These results apply to a wide range of price stickiness models because the market failure
which the policymaker should aim to mitigate arises from imperfect competition, not from price stickiness itself.
Inflation Persistence When Price Stickiness Differs Between Industries, May 2007
- CEP discussion paper #838
Abstract: There is much evidence that price-adjustment frequencies vary widely across industries. This paper shows
that inflation persistence is lower with heterogeneity in price stickiness than without it, taking as given the degree of
persistence in variables affecting inflation. Differences in the frequency of price adjustment mean that the pool of firms
which responds to any macroeconomic shock is unrepresentative, containing a disproportionately large number of firms from
industries with more flexible prices. Consequently, this group of firms is more likely to reverse any initial price change
after a shock has dissipated, making inflation persistence much harder to explain.
Intrinsic Inflation Persistence, May 2007 (earlier version entitled Structural Inflation Persistence)
- CEP discussion paper #837
Abstract: It is often argued that the New Keynesian Phillips curve is at odds with the data because it cannot
explain inflation persistence - the difficulty of returning inflation immediately to target after a shock without any
loss of output. This paper explains how a model where newer prices are stickier than older prices is consistent with
this phenomenon, even though it introduces no deviation from optimizing, forwards-looking price setting. The probability
of adjusting new and old prices is estimated using a novel method that draws only on macroeconomic data, and the findings
strongly support the premise of the model.
Last updated: 26th January 2010