Economists can now model how inflation changes prices without ignoring how firms actually set them

This paper makes it easier to build economic models that show how prices change over time. It adds a small, constant downward pressure on prices to a standard model, which makes the math work out better.

For decades, economists have struggled to build models that accurately show how individual firms decide to change prices, and how those decisions affect overall inflation. This paper offers a way to simplify that math, making it easier to predict how inflation will respond to big economic shocks. It means central banks might get better tools to understand why prices move the way they do.