Inflation and Asymmetric Output Adjustments by Firms
AbstractUsing ordered probit analyses of a unique micro data set, the authors find evidence of output asymmetry that is systematically related to inflation and to price asymmetry. As predicted by theory, firms are more likely at higher rates of inflation to raise prices in response to positive cost and demand shocks and less likely to lower prices in response to negative and demand shocks. The expected effects of higher inflation on output asymmetry, however, come primarily from cost and demand increases and to a lesser (and statistically insignificant) extent from cost and demand decreases. Copyright 1998 by Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 36 (1998)
Issue (Month): 2 (April)
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- Karras, Georgios & Stokes, Houston H., 1999. "Why are the effects of money-supply shocks asymmetric? Evidence from prices, consumption, and investment," Journal of Macroeconomics, Elsevier, vol. 21(4), pages 713-727.
- Luís Cabral & Arthur Fishman, 2011.
"Business as Usual: A Consumer Search Theory of Sticky Prices and Asymmetric Price Adjustment,"
2011-01, Department of Economics, Bar-Ilan University.
- Cabral, Luís & Fishman, Arthur, 2012. "Business as usual: A consumer search theory of sticky prices and asymmetric price adjustment," International Journal of Industrial Organization, Elsevier, vol. 30(4), pages 371-376.
- David Law & Bob Buckle & Dean Hyslop, 2006. "Toward a Model of Firm Productivity Dynamics," Treasury Working Paper Series 06/11, New Zealand Treasury.
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