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Why prices transmit large-scale shocks more quickly
[Pourquoi les prix transmettent plus vite les chocs de grande ampleur]

Author

Listed:
  • Erwan Gautier
  • Hervé Le Bihan
  • Francesco Lippi

Abstract

When shocks to production costs are small, price changes are relatively rare. A shock then takes several months to be transmitted to prices and inflation. When a major shock occurs, however, prices adjust more quickly than in normal times - which helps to explain why the recent episode of high inflation may have come as a surprise. Lorsque les chocs sur les coûts des entreprises sont de faible amplitude, les changements de prix sont relativement rares. Un choc met alors plusieurs mois à se transmettre aux prix et à l’inflation. Face à un choc de grande ampleur en revanche, les prix s’ajustent plus rapidement qu’en temps normal – contribuant à expliquer pourquoi l’épisode de forte inflation récent a pu surprendre.

Suggested Citation

  • Erwan Gautier & Hervé Le Bihan & Francesco Lippi, . "Why prices transmit large-scale shocks more quickly [Pourquoi les prix transmettent plus vite les chocs de grande ampleur]," Eco Notepad (in progress), Banque de France.
    • Handle: RePEc:bfr:econot:324
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