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Macroeconomic Dynamics with Product Market Frictions

Total Cost €


EC-Contrib. €






Project "MACROPMF" data sheet

The following table provides information about the project.

Istituto Einaudi per l'Economia e la Finanza 

Organization address
address: via sallustiana 62
city: ROMA
postcode: 187

contact info
title: n.a.
name: n.a.
surname: n.a.
function: n.a.
email: n.a.
telephone: n.a.
fax: n.a.

 Coordinator Country Italy [IT]
 Project website
 Total cost 1˙192˙000 €
 EC max contribution 1˙192˙000 € (100%)
 Programme 1. H2020-EU.1.1. (EXCELLENT SCIENCE - European Research Council (ERC))
 Code Call ERC-2015-STG
 Funding Scheme ERC-STG
 Starting year 2016
 Duration (year-month-day) from 2016-02-01   to  2020-01-31


Take a look of project's partnership.

# participants  country  role  EC contrib. [€] 
1    Istituto Einaudi per l'Economia e la Finanza IT (ROMA) coordinator 1˙192˙000.00


 Project objective

The transmission of microeconomic and macroeconomic shocks to firms' price and demand in product markets is the cornerstone of a large volume of macroeconomic literature. Product market frictions, by reducing the ability of demand to relocate across different suppliers, affect firms' incentives when setting prices, and therefore the pass-through of shocks to both demand and prices. In this project we plan to study the implications of product market frictions for firm level price and demand dynamics, as well as for macroeconomic dynamics. The aim is to integrate micro and macro economics, both theoretically and empirically, to a greater extent than is currently done in the literature.

We will apply our tools to two main areas of interest. First, we will study how product market frictions affect the optimal pricing decision of firms, and the relocation of consumers across different suppliers. We will provide novel empirical microeconomic evidence on the relationship between price and consumer dynamics. We will build a rich but yet tractable model where product market frictions give rise to firm pricing with customer markets. The aim is to use observable statistics from the micro data to estimate the key parameters of the model and quantify the relevance of the product market frictions for firm pricing and demand dynamics.

Second, we will explore the importance of product market frictions for macroeconomic dynamics. We will apply our quantified model of price and consumer dynamics to areas of macroeconomics where we expect our methodology and empirical analysis to be more relevant, both because of the types of questions addressed and because of a direct relationship with the mechanism. In particular we will focus on the role of product market frictions for business cycle fluctuations and international trade.


year authors and title journal last update
List of publications.
2019 Luigi Paciello, Andrea Pozzi, Nicholas Trachter
published pages: 413-446, ISSN: 0020-6598, DOI: 10.1111/iere.12358
International Economic Review 60/1 2019-04-18
2017 Luigi Paciello Andrea Pozzi Nicholas Trachter
Price Dynamics with Customer Markets
published pages: , ISSN: , DOI:
2017 Claudio Michelacci Luigi Paciello
Ambiguous Policy Announcements
published pages: , ISSN: , DOI:

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The information about "MACROPMF" are provided by the European Opendata Portal: CORDIS opendata.

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