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Dynamics of Price Adjustments: Evidence From Micro Level Data For Chile

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Author Info
Juan Pablo Medina G.
David Rappoport W.
Claudio Soto G.

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Abstract

This paper characterizes the dynamics of price adjustments in Chile using data at the establishment level of goods in the CPI basket. Our results show that nominal rigidities are lower when measured at micro-level compared to estimates based on macro data. The frequency of price adjustments appears to be relatively stable over the sample period 1999-2005. On the other hand, if we decompose price adjustments in upward and downward changes, we observe that these frequencies of adjustments for some groups of products are correlated with the level of aggregate inflation. Thus, the data shows that the intensive and extensive margins of price adjustment play a role in determining price dynamics. Finally, we find a considerable degree of synchronization in price adjustments across establishments and a moderate increase in price dispersion since 1999.

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Publisher Info
Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 10 (2007)
Issue (Month): 2 (August)
Pages: 5-26
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Handle: RePEc:chb:bcchec:v:10:y:2007:i:2:p:5-26

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  1. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1295-1328, November. [Downloadable!] (restricted)
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  2. John B. Taylor, 1980. "Aggregate Dynamics and Staggered Contracts," NBER Reprints 0126, National Bureau of Economic Research, Inc.
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  3. Mark Bils and Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
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  4. Fisher, Timothy C. G. & Konieczny, Jerzy D., 2000. "Synchronization of price changes by multiproduct firms: evidence from Canadian newspaper prices," Economics Letters, Elsevier, vol. 68(3), pages 271-277, September. [Downloadable!] (restricted)
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  7. Caplin, Andrew S & Spulber, Daniel F, 1987. "Menu Costs and the Neutrality of Money," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 703-25, November. [Downloadable!] (restricted)
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  8. Etienne Gagnon, 2006. "Price Setting during Low and High Inflation: Evidence from Mexico," 2006 Meeting Papers 300, Society for Economic Dynamics. [Downloadable!]
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  9. Mikhail Golosov & Robert E. Lucas, 2003. "Menu Costs and Phillips Curves," NBER Working Papers 10187, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Caballero, Ricardo J. & Engel, Eduardo M. R. A., 1993. "Microeconomic rigidities and aggregate price dynamics," European Economic Review, Elsevier, vol. 37(4), pages 697-711, May. [Downloadable!] (restricted)
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  11. Ricardo J. Caballero & Eduardo Engel, 2003. "Adjustment is Much Slower than You Think," NBER Working Papers 9898, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing And The General Equilibrium Dynamics Of Money And Output," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 655-690, May. [Downloadable!] (restricted)
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  14. Solange Gouvea, 2007. "Price Rigidity in Brazil: Evidence from CPI Micro Data," Working Papers Series 143, Central Bank of Brazil, Research Department. [Downloadable!]
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  17. Luc Aucremanne & Emmanuel Dhyne, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Research series 200404-1, National Bank of Belgium. [Downloadable!]
  18. Luc Aucremanne & Emmanuel Dhyne, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 331, European Central Bank. [Downloadable!]
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  20. Laurent Baudry & Hervé Le Bihan & Patrick Sevestre & Sylvie Tarrieu, 2004. "Price rigidity. Evidence from the French CPI micro-data," Working Paper Series 384, European Central Bank. [Downloadable!]
  21. Peter J. Klenow & Jonathan L. Willis, 2006. "Real rigidities and nominal price changes," Research Working Paper RWP 06-03, Federal Reserve Bank of Kansas City. [Downloadable!]
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