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Price adjustment in open economies

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  • Torben Andersen
  • Niels Hansen
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    Abstract

    The adjustment of product prices in open economies is analyzed by use of a model encompassing different product market structures and quarterly data for Denmark, Germany, the Netherlands, Norway, and Sweden. In general, support is found in favor of a specialized production model implying that prices are affected by internal and external factors. Price adjustment displays substantial inertia and is in the short run driven by real shocks to both supply and demand, as well as being characterized by nominal rigidities, whereas in the long run relative prices are driven solely by supply variables. Copyright Kluwer Academic Publishers 1995

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    File URL: http://hdl.handle.net/10.1007/BF01000385
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    Bibliographic Info

    Article provided by Springer in its journal Open Economies Review.

    Volume (Year): 6 (1995)
    Issue (Month): 4 (October)
    Pages: 303-321

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    Handle: RePEc:kap:openec:v:6:y:1995:i:4:p:303-321

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    Web page: http://www.springerlink.com/link.asp?id=100323

    Related research

    Keywords: price adjustment; foreign competition; nominal rigidities;

    References

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    1. Dixon, Huw David & Rankin, Neil, 1994. "Imperfect Competition and Macroeconomics: A Survey," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 171-99, April.
    2. Geroski, P A, 1992. "Price Dynamics in UK Manufacturing: A Microeconomic View," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 59(236), pages 403-19, November.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. Silvestre, J., 1991. "The Market-Power Foundations of Macroeconomic Policy," Papers, California Davis - Institute of Governmental Affairs 374, California Davis - Institute of Governmental Affairs.
    5. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
    6. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers, Queen's University, Department of Economics 1227, Queen's University, Department of Economics.
    7. Bruce, Neil & Purvis, Douglas D., 1985. "The specification and influence of goods and factor markets in open-economy macroeconomic models," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 16, pages 807-857 Elsevier.
    8. Goldin,Ian & Winters,L. Alan (ed.), 1992. "Open Economies," Cambridge Books, Cambridge University Press, number 9780521420563, 9.
    9. Alogoskoufis, George & Martin, Christopher & Pittis, Nikitas, 1990. "Pricing and Product Market Structure in Open Economies: An Empirical Test," CEPR Discussion Papers 486, C.E.P.R. Discussion Papers.
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    Cited by:
    1. Smith, Peter N., 2000. "Output price determination and the business cycle," Economic Modelling, Elsevier, vol. 17(1), pages 49-69, January.

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