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Price adjustment in open economies

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  • Torben Andersen
  • Niels Hansen

Abstract

The adjustment of product prices in open economies is analyzed by use of a model encompassing different product market structures and quarterly data for Denmark, Germany, the Netherlands, Norway, and Sweden. In general, support is found in favor of a specialized production model implying that prices are affected by internal and external factors. Price adjustment displays substantial inertia and is in the short run driven by real shocks to both supply and demand, as well as being characterized by nominal rigidities, whereas in the long run relative prices are driven solely by supply variables. Copyright Kluwer Academic Publishers 1995

Suggested Citation

  • Torben Andersen & Niels Hansen, 1995. "Price adjustment in open economies," Open Economies Review, Springer, vol. 6(4), pages 303-321, October.
    • Handle: RePEc:kap:openec:v:6:y:1995:i:4:p:303-321
    DOI: 10.1007/BF01000385
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    References listed on IDEAS

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    1. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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    6. James G. MacKinnon, 2010. "Critical Values For Cointegration Tests," Working Paper 1227, Economics Department, Queen's University.
    7. Alogoskoufis, George & Martin, Christopher & Pittis, Nikitas, 1990. "Pricing and Product Market Structure in Open Economies: An Empirical Test," CEPR Discussion Papers 486, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Smith, Peter N., 2000. "Output price determination and the business cycle," Economic Modelling, Elsevier, vol. 17(1), pages 49-69, January.

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