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Price dynamics, retail chains and inflation measurement

  • Nakamura, Alice O.
  • Nakamura, Emi
  • Nakamura, Leonard I.

We use a large scanner price dataset to study grocery price dynamics. Previous analyses based on store scanner data emphasize differences in price dynamics across products. However, we also document large differences in price movements across different grocery store chains. A variance decomposition indicates that characteristics at the level of the chains (as opposed to individual stores) explain a large fraction of the total variation in price dynamics. Thus, retailer characteristics are found to be crucial determinants of heterogeneity in pricing dynamics, in addition to product characteristics. We empirically explore how the price dynamics we document affect price index measures.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304-4076(10)00185-5
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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 161 (2011)
Issue (Month): 1 (March)
Pages: 47-55

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Handle: RePEc:eee:econom:v:161:y:2011:i:1:p:47-55
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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  1. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, Oxford University Press, vol. 123(4), pages 1415-1464.
  2. Robert C. Feenstra & Matthew D. Shapiro, 2003. "High-Frequency Substitution and the Measurement of Price Indexes," NBER Chapters, in: Scanner Data and Price Indexes, pages 123-150 National Bureau of Economic Research, Inc.
  3. Peter J. Klenow & Oleksiy Kryvtsov, 2005. "State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?," NBER Working Papers 11043, National Bureau of Economic Research, Inc.
  4. Mikhail Golosov & Robert E. Lucas Jr., 2007. "Menu Costs and Phillips Curves," Journal of Political Economy, University of Chicago Press, vol. 115, pages 171-199.
  5. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  6. Woodford, Michael, 2009. "Information-constrained state-dependent pricing," Journal of Monetary Economics, Elsevier, vol. 56(S), pages S100-S124.
  7. Emmanuel Dhyne & Luis J. Álvarez & Hervé Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lünnemann & Fabio Rumler & Jouko Vilmunen, 2005. "Price setting in the euro area: Some stylized facts from Individual Consumer Price Data," Working Papers w200506, Banco de Portugal, Economics and Research Department.
  8. Emi Nakamura & Jón Steinsson, 2008. "Monetary Non-Neutrality in a Multi-Sector Menu Cost Model," NBER Working Papers 14001, National Bureau of Economic Research, Inc.
  9. Joel Sobel, 1984. "The Timing of Sales," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 353-368.
  10. W. Erwin Diewert, 1998. "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 47-58, Winter.
  11. Daniel Hosken & David Reiffen, 2004. "Patterns of Retail Price Variation," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 128-146, Spring.
  12. Emi Nakamura, 2008. "Pass-Through in Retail and Wholesale," American Economic Review, American Economic Association, vol. 98(2), pages 430-37, May.
  13. Leonard I. Nakamura, 1997. "The measurement of retail output and the retail revolution," Working Papers 97-4, Federal Reserve Bank of Philadelphia.
  14. Martin Pesendorfer, 2002. "Retail Sales: A Study of Pricing Behavior in Supermarkets," The Journal of Business, University of Chicago Press, vol. 75(1), pages 33-66, January.
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