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A state-dependent model of intermediate goods pricing

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  • Brent, Neiman

Abstract

Recent analyses of transaction-level data sets have generated new stylized facts on price setting and greatly influenced the empirical open- and closed-economy macroeconomics literatures. This work has uncovered marked heterogeneity in price stickiness, demonstrated that even non-zero price changes do not fully âpass throughâ exchange rate shocks, and offered evidence of synchronization in the timing of price changes. Further, intrafirm prices have been shown to differ from arm's length prices in each of these characteristics. This paper develops a state-dependent model of price setting by strategic intermediate goods producers that anticipate and respond to their competitors' actions. The model, which allows for both arm's length and intrafirm transactions, is able to generate all of these empirical pricing patterns.

Suggested Citation

  • Brent, Neiman, 2011. "A state-dependent model of intermediate goods pricing," Journal of International Economics, Elsevier, vol. 85(1), pages 1-13, September.
  • Handle: RePEc:eee:inecon:v:85:y:2011:i:1:p:1-13
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Mongey, Simon, 2017. "Market Structure and Monetary Non-neutrality," Staff Report 558, Federal Reserve Bank of Minneapolis.
    2. Neiman, Brent, 2010. "Stickiness, synchronization, and passthrough in intrafirm trade prices," Journal of Monetary Economics, Elsevier, vol. 57(3), pages 295-308, April.
    3. Logan Lewis, 2013. "Menu Costs, Trade Flows, and Exchange Rate Volatility," 2013 Meeting Papers 313, Society for Economic Dynamics.
    4. repec:eee:iburev:v:26:y:2017:i:6:p:1034-1050 is not listed on IDEAS
    5. Alberto Cavallo & Brent Neiman & Roberto Rigobon, 2014. "Currency Unions, Product Introductions, and the Real Exchange Rate," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 529-595.
    6. repec:pal:imfecr:v:65:y:2017:i:3:d:10.1057_s41308-017-0037-1 is not listed on IDEAS
    7. Simon Mongey, 2017. "Market Structure and Monetary Non-Neutrality," 2017 Meeting Papers 184, Society for Economic Dynamics.

    More about this item

    Keywords

    Exchange rate passthrough Price stickiness Dynamic oligopoly Intrafirm trade;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F1 - International Economics - - Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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