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Inflationary Expectations and Price Setting Behavior

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  • Fair, Ray C

Abstract

This paper tests for the existence of expectational effects in very disaggregate price equations. Price equations are estimated using monthly data for each of forty products. The dynamic specification of the equations is also tested, including whether the equations should be specified in level form or in change form. The results support the hypothesis that aggregate price expectations aff ect individual pricing decisions. The results do not discriminate very w ell between the level and change forms of the price equation, although there is a slight edge for the level form. The lag and lead lengths are not estimated precisely. The average lag length is about thirty-eigh t months, and the average lead length is about five months. Copyright 1993 by MIT Press.

Suggested Citation

  • Fair, Ray C, 1993. "Inflationary Expectations and Price Setting Behavior," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 8-18, February.
  • Handle: RePEc:tpr:restat:v:75:y:1993:i:1:p:8-18
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    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Andrews, Donald W. K. & Fair, Ray C., 1992. "Estimation of polynomial distributed lags and leads with end point constraints," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 123-139.
    3. Fair, Ray C, 1993. "Testing the Rational Expectations Hypothesis in Macroeconometric Models," Oxford Economic Papers, Oxford University Press, vol. 45(2), pages 169-190, April.
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    Cited by:

    1. Li, Shanjun & Yoo, Han Kyul & Macauley, Molly & Palmer, Karen & Shih, Jhih-Shyang, 2015. "Assessing the role of renewable energy policies in landfill gas to energy projects," Energy Economics, Elsevier, vol. 49(C), pages 687-697.
    2. Andrews, Donald W. K. & Fair, Ray C., 1992. "Estimation of polynomial distributed lags and leads with end point constraints," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 123-139.
    3. Silvia Fabiani & Angela Gattulli & Roberto Sabbatini, 2003. "La rigidità dei prezzi in Italia," Moneta e Credito, Economia civile, vol. 56(223), pages 325-358.

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