IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Some Evidence on the Importance of Sticky Prices

  • Mark Bils
  • Peter J. Klenow

We examine the frequency of price changes for 350 categories of goods and services covering about 70% of consumer spending, based on unpublished data from the BLS for 1995 to 1997. Compared with previous studies we find much more frequent price changes, with half of prices lasting less than 4.3 months. The frequency of price changes differs dramatically across categories. We exploit this variation to ask how inflation for 'flexible-price goods' (goods with frequent changes in individual prices) differs from inflation for 'sticky-price goods' (those displaying infrequent price changes). Compared to the predictions of popular sticky price models, actual inflation rates are far more volatile and transient, particularly for sticky-price goods. The data appendix for this paper can be found at http://www.nber.org/data-appendix/w9069/

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.jstor.org/stable/pdfplus/10.1086/422559
Download Restriction: Access to the online full text or PDF requires a subscription.

File URL: http://www.jstor.org/stable/full/10.1086/422559
Download Restriction: Access to the online full text or PDF requires a subscription.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 112 (2004)
Issue (Month): 5 (October)
Pages: 947-985

as
in new window

Handle: RePEc:ucp:jpolec:v:112:y:2004:i:5:p:947-985
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Anil K Kashyap, 1994. "Sticky Prices: New Evidence from Retail Catalogs," NBER Working Papers 4855, National Bureau of Economic Research, Inc.
  2. Andrew Levin & Christopher J. Erceg & Dale W. Henderson, 1999. "Optimal Monetary Policy with Staggered Wage and Price Contracts," Computing in Economics and Finance 1999 1151, Society for Computational Economics.
  3. Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Finance and Economics Discussion Series 93-17, Board of Governors of the Federal Reserve System (U.S.).
  4. Dennis W. Carlton, 1986. "The Theory and the Facts of How Markets Clear: Is Industrial Organization Valuable for Understanding Macroeconomics?," University of Chicago - George G. Stigler Center for Study of Economy and State 44, Chicago - Center for Study of Economy and State.
  5. Sbordone, Argia M., 2002. "Prices and unit labor costs: a new test of price stickiness," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 265-292, March.
  6. Andrew C. Caplin & Daniel F. Spulber, 1987. "Menu Costs and the Neutrality of Money," NBER Working Papers 2311, National Bureau of Economic Research, Inc.
  7. Hall, Simon & Walsh, Mark & Yates, Anthony, 2000. "Are UK Companies' Prices Sticky?," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 425-46, July.
  8. James M. MacDonald & Daniel Aaronson, 2000. "How do retail prices react to minimum wage increases?," Working Paper Series WP-00-20, Federal Reserve Bank of Chicago.
  9. Lee E. Ohanian & Alan C. Stockman & Lutz Killian, 1994. "The effects of real and monetary shocks in a business cycle model with some sticky prices," Proceedings, Federal Reserve Bank of Cleveland, pages 1209-1240.
  10. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
  11. Elizabeth Caucutt & Mrinal Ghosh & Christina Kelton, 1999. "Durability Versus Concentration as an Explanation for Price Inflexibility," Review of Industrial Organization, Springer, vol. 14(1), pages 27-50, February.
  12. Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-83, April.
  13. Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-55, December.
  14. John B. Taylor, 1998. "Staggered Price and Wage Setting in Macroeconomics," NBER Working Papers 6754, National Bureau of Economic Research, Inc.
  15. Benigno, Pierpaolo, 2001. "Optimal Monetary Policy in a Currency Area," CEPR Discussion Papers 2755, C.E.P.R. Discussion Papers.
  16. Ball, Laurence & Romer, David, 1991. "Sticky Prices as Coordination Failure," American Economic Review, American Economic Association, vol. 81(3), pages 539-52, June.
  17. Michael Dotsey & Robert G. King, 2005. "Pricing, production, and persistence," Working Papers 05-4, Federal Reserve Bank of Philadelphia.
  18. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-58, September.
  19. Barro, Robert J, 1972. "A Theory of Monopolistic Price Adjustment," Review of Economic Studies, Wiley Blackwell, vol. 39(1), pages 17-26, January.
  20. Aoki, Kosuke, 2001. "Optimal monetary policy responses to relative-price changes," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 55-80, August.
  21. Jonathan L. Willis, 2000. "Estimation of adjustment costs in a model of state-dependent pricing," Research Working Paper RWP 00-07, Federal Reserve Bank of Kansas City.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. Some Evidence on the Importance of Sticky Prices (JPE 2004) in ReplicationWiki
  2. Economic Logic blog

When requesting a correction, please mention this item's handle: RePEc:ucp:jpolec:v:112:y:2004:i:5:p:947-985. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.