Daniel Dias () (Banco de Portugal and Anderson School of Management, UCLA) Carlos Robalo Marques () (Banco de Portugal) J.M.C. Santos Silva () (ISEG/Universidade Tecnica de Lisboa)
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In this note we reappraise the measure of the importance of time-dependent price setting rules suggested by Klenow and Kryvtsov (2005, "State-Dependent or Time-Dependent Pricing: Does It Matter for Recent U.S. Inflation?," Bank of Canada Working Paper 05-4). Furthermore, we propose an alternative way to gauge the significance of this type of price setting behavior, which can be interpreted as an upper bound for the proportion of price trajectories which are compatible with the uniform nonsynchronization hypothesis. The merits of the proposed measure are highlighted in an application using micro-data. Our results suggest that a large proportion of price trajectories may be compatible with simple time-dependent price setting mechanisms, but the strength of this evidence very much depends on the way that is used to evaluate the importance of this type of behavior.
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Article provided by Economics Bulletin in its journal Economics Bulletin.
Find related papers by JEL classification: D4 - Microeconomics - - Market Structure and Pricing L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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