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Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data

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Author Info

  • Daniel Levy

    (Bar-Ilan & Emory)

  • Shantanu Dutta

    (USC)

  • Mark Bergen

    (Minnesota)

Abstract

We combine two data sets to study price rigidity. The first consists of weekly time series of retail, wholesale, and spot prices for twelve products. These time series contain two exogenous cost shocks. We find that prices exhibit more rigidity in response to the second shock than the first. The second data set consists of all publicly available information about the shocks. Content analysis of these information reveals that the first shock is larger and more persistent, and the market has more information on it than the second. We conclude, therefore, that prices are more flexible in response to cost shocks that are larger, that are more persistent, and on which market participants have more information.

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File URL: http://128.118.178.162/eps/mac/papers/0402/0402021.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0402021.

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Length: 38 pages
Date of creation: 07 Feb 2004
Date of revision:
Handle: RePEc:wpa:wuwpma:0402021

Note: Type of Document - pdf; prepared on Win 98; to print on Any printer; pages: 38 ; figures: Figures are included
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Web page: http://128.118.178.162

Related research

Keywords: price rigidity; price flexibility; sticky prices; flexible prices; variation in price rigidity; variation in price flexibility; exogeneous shock; cost shock; shock persistence; size of shocks; market information; transaction price data; weekly scanner data; spot price; orange juice; frozen concentrate orange juice; futures price; retail price; wholesale price; publicly available information; market response to information; news; price response to exogenous cost shocks; New Keynesian macroeconomics;

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