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Do prices respond asymmetrically to cost changes?

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  • Tay-Cheng Ma

Abstract

This article investigates price asymmetry by using an almost complete sample of Taiwanese industries to see whether output prices respond faster to cost increases than they do to decreases. In contrast with the earlier literature, the evidence shows that positive price asymmetry cannot be applied to all industries, especially those industries with rapid productivity growth. The evidence also indicates that firms exhibiting fast (slow) productivity growth see their prices react less (more) to cost increases than to cost decreases.

Suggested Citation

  • Tay-Cheng Ma, 2010. "Do prices respond asymmetrically to cost changes?," Applied Economics, Taylor & Francis Journals, vol. 42(9), pages 1183-1196.
  • Handle: RePEc:taf:applec:v:42:y:2010:i:9:p:1183-1196 DOI: 10.1080/00036840701721240
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