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Asymmetric Adjustments of Price and Output

Author

Listed:
  • Tinsley, P A
  • Krieger, Reva

Abstract

Classical theories predict rapid price adjustments, which are observed in inflationary episodes; Keynesian theories of sticky prices predict sluggish price responses, which are observed in contractions. The authors attempt to reconcile these observations in a model with asymmetries in producer price and output adjustments. Analysis of SIC two-digit industry data indicates production frequently exhibits negative asymmetry--shortfalls from trend are larger than positive deviations--whereas price often displays positive asymmetry. Evidence supporting two rational motives for asymmetric pricing is presented, but causal interactions between output and price asymmetries are not resolved. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Tinsley, P A & Krieger, Reva, 1997. "Asymmetric Adjustments of Price and Output," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 631-652, July.
    • Handle: RePEc:oup:ecinqu:v:35:y:1997:i:3:p:631-52
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    Cited by:

    1. Bergvall, Anders & Forsfält, Tomas & Hjelm, Göran & Nilsson, Jonny & Vartiainen, Juhana, 2007. "KIMOD 1.0 Documentation of NIER´s Dynamic Macroeconomic General Equilibrium Model of the Swedish Economy," Working Papers 100, National Institute of Economic Research.
    2. Deleersnyder, B. & Dekimpe, M.G. & Sarvary, M. & Parker, P.M., 2003. "Weathering Tight Economic Times: The Sales Evolution Of Consumer Durables Over The Business Cycle," ERIM Report Series Research in Management ERS-2003-046-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    3. Rena Sivitanidou, 1999. "Does the Theory of Irreversible Investments Help Explain Movements in Office-Commerical Construction?," Working Paper 8659, USC Lusk Center for Real Estate.
    4. Yamei Liu & Walter Enders, 2003. "Out‐of‐Sample Forecasts and Nonlinear Model Selection with an Example of the Term Structure of Interest Rates," Southern Economic Journal, John Wiley & Sons, vol. 69(3), pages 520-540, January.
    5. Ramos, Raul & Clar, Miquel & Surinach, Jordi, 1999. "EMU: some unanswered questions," ERSA conference papers ersa99pa220, European Regional Science Association.
    6. Carol Corrado & Joe Mattey, 1997. "Capacity Utilization," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 151-167, Winter.
    7. Kuo, Shew-Huei, 2000. "An examination of the evolving relationship between interest rates of different maturities in Japan, and test of the expectations hypothesis of the term structure to ascertain the feasibility of using asymmetric dynamics in yield spreads," ISU General Staff Papers 2000010108000014910, Iowa State University, Department of Economics.
    8. repec:isu:genstf:2000010108000014914 is not listed on IDEAS
    9. Morris, Daniel H. & Parrott, Scott D. & Mehlhorn, Joey & Tewari, Rachna & Pruitt, Ross, . "The Price Transmission Relationship Between Ethanol, Wholesale Gasoline, And Blended Retail Gasoline," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 5(2).

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