Online Sales, Price Stickiness and Monetary Policy Transmission——A Revisit of the New Keynesian Framework in the Digital Economy

This study is grounded in the rapidly evolving context of the digital economy and aims to revisit and extend the traditional New Keynesian macroeconomic framework. Specifically,it explores how the rise of online sales channels affects price stickiness,the transmission mechanism of monetary policy,and overall social welfare. With the widespread application of digital technologies—such as the internet,big data,cloud computing,and artificial intelligence—the digital economy has become a key engine driving China's economic and social development,profoundly transforming traditional modes of production and consumption. In particular,the rapid expansion of major e-commerce platforms such as Taobao,Tmall,and JD.com has broken the temporal and spatial constraints of traditional retail,reduced information asymmetries between firms and consumers,and significantly improved the flexibility of price adjustment and resource allocation efficiency. By 2024,China's online retail sales reached RMB 15.5 trillion,accounting for 26.8% of total retail sales of consumer goods,maintaining its position as the world's largest online retail market for 12 consecutive years and becoming an increasingly important driver of economic growth. However,this profound transformation also presents challenges to conventional macroeconomic theories and policy frameworks. One of the core assumptions of New Keynesian macroeconomics is price stickiness—i.e.,the sluggish adjustment of prices in response to changes in market conditions. This assumption underpins the short-run non-neutrality of monetary policy and its effectiveness in stabilizing economic fluctuations. Yet,the development of the digital economy significantly reduces price stickiness in online markets,potentially weakening the effectiveness of monetary policy and increasing inflation volatility. At the same time,improvements in production efficiency and reductions in search costs enabled by digital technologies may offset inflationary pressures and enhance the transmission of monetary policy. Using quarterly data from A-share listed companies in China from 2015 to 2019,this paper empirically investigates the heterogeneous effects of monetary policy shocks on online and offline sales via the local projection method. The results show that,under both quantitative and price-based expansionary monetary policy shocks,the year-over-year growth rate of online sales is consistently higher than that of offline sales. To provide a deeper explanation for these empirical findings,we construct a dynamic New Keynesian DSGE model that incorporates both online and offline sectors. In the model,the online sector,due to the adoption of digital technologies,enjoys lower search costs,higher production efficiency,and lower price stickiness compared to the offline sector. Through numerical simulation,we find that the relative strength of the price stickiness and search cost mechanisms determines the differential impact of monetary policy on online versus offline sales. On the one hand,lower price stickiness attenuates the stimulus effect of monetary policy on online sales; on the other hand,improvements in production efficiency and reductions in search costs can counteract,and under certain conditions even outweigh,the negative effects of reduced price stickiness—thus making online sales more responsive to monetary policy shocks. Specifically,when the labor output elasticity in the online sector exceeds a certain threshold,the search cost mechanism becomes dominant,and expansionary monetary policy significantly boosts online sales growth. Furthermore,this paper examines the welfare implications of technology shocks and the optimal design of monetary policy rules. By incorporating a welfare loss function,we find that the development of the digital economy—via lower search costs and higher production efficiency—substantially improves social welfare. Compared to a counterfactual scenario without digital economy development,welfare increases by approximately 6.54%. In addition,our findings suggest that as the digital economy expands,monetary policy should place greater emphasis on stabilizing output fluctuations rather than focusing solely on inflation volatility. This implies that in the digital era,central banks should adjust their policy rules to better accommodate the cost advantages and efficiency gains brought by digital transformation. The findings of this paper make the following contributions. First,on the theoretical front,we go beyond existing literature that primarily focuses on the negative implications of reduced price stickiness for monetary policy effectiveness. By introducing new perspectives related to declining search costs and rising production efficiency,this study re-evaluates the monetary transmission mechanism in the digital economy. We show that the cost advantages brought by digital transformation may not only offset the negative effects of reduced price stickiness,but also enhance monetary policy effectiveness under certain conditions—thereby enriching the applicability and explanatory power of New Keynesian macroeconomic theory in the digital age. Second,in terms of model innovation,this study builds on Glocker and Piribauer (2021) by developing a more refined and realistic two-sector DSGE model that explicitly captures the cost advantages and productivity enhancements of the online sector driven by digital technology adoption. Through parameter calibration and numerical simulation,we successfully account for the empirical observation that online sales are more responsive to monetary policy shocks,offering a solid theoretical framework and methodological reference for future research. Third,from a policy perspective,this study provides welfare-based analysis and discusses optimal monetary policy rules,emphasizing that in the digital economy era,monetary policy should place greater emphasis on output stabilization rather than targeting inflation alone. This conclusion offers important theoretical and practical guidance for the formulation of current and future monetary policy in China,especially in light of the continuing expansion of the digital economy and the rising share of online sales. Central banks must promptly adapt their policy frameworks and instruments to ensure macroeconomic stability and maximize social welfare The simulation results show that the sectoral ranking of the carbon reduction effect and direct emissions does not correspond one-to-one.Taxing “Petroleum,Coking Products and Processed Nuclear Fuel Products”, “Production and Supply of Electricity and Heat”, and “Metal Smelting and Rolling Processed Products” among the 42 sectorsor taxing “Production and Supply of Electricity and Heat”, “Refined Petroleum and Processed Nuclear Fuel Products” and “Rolled Steel Products” among the 153 sectors will bring the most significantcarbon reduction effect.As the above sectors are the main suppliers of raw materials and major carbon emitters in the production network,imposing carbon tax will prompt them to reform their production technologies and optimize their energy structures,thereby achieving an effective reduction in the total carbon emissions of the economy through their upstream and downstream influences.In addition,taxing on “Petroleum,Coking Products and Processed Nuclear Fuel Products” can bring the biggest decrease in total carbon emissions with a smaller drop of its own production.