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Microeconomic Price Adjustments and Inflation: Evidence from Spanish Sectoral Data

Author

Listed:
  • Ángel Estrada
  • Ignacio Hernando

Abstract

The purpose of this paper is to illustrate the implications for aggregate price dynamics of alternative characterizations of microeconomic price adjustment policies. Within the hazard adjustment framework developed in Caballero and Engel (1993a), we present alternative models of individual price adjustment that are consistent with the predictions of the menu-cost models.

Suggested Citation

  • Ángel Estrada & Ignacio Hernando, 1999. "Microeconomic Price Adjustments and Inflation: Evidence from Spanish Sectoral Data," Working Papers 9921, Banco de España.
    • Handle: RePEc:bde:wpaper:9921
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    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/99/Fic/dt9921e.pdf
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    References listed on IDEAS

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    1. Robert Amano & Tiff Macklem, 1997. "Menu Costs, Relative Prices, and Inflation: Evidence for Canada," Staff Working Papers 97-14, Bank of Canada.
    2. Caballero, Ricardo J & Engel, Eduardo M R A, 1991. "Dynamic (S, s) Economies," Econometrica, Econometric Society, vol. 59(6), pages 1659-1686, November.
    3. Julio J. Rotemberg & Michael Woodford, 1991. "Markups and the Business Cycle," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 63-140, National Bureau of Economic Research, Inc.
    4. Laurence Ball & N. Gregory Mankiw, 1995. "Relative-Price Changes as Aggregate Supply Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 161-193.
    5. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    6. Eytan Sheshinski & Yoram Weiss, 1977. "Inflation and Costs of Price Adjustment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(2), pages 287-303.
    7. Caballero, Ricardo J. & Engel, Eduardo M. R. A., 1993. "Microeconomic rigidities and aggregate price dynamics," European Economic Review, Elsevier, vol. 37(4), pages 697-711, May.
    8. Anthony Yates, 1998. "Downward nominal rigidity and monetary policy," Bank of England working papers 82, Bank of England.
    9. Caballero, Ricardo J & Engel, Eduardo M R A, 1992. "Beyond the Partial-Adjustment Model," American Economic Review, American Economic Association, vol. 82(2), pages 360-364, May.
    10. Eytan Sheshinski & Yoram Weiss (ed.), 1993. "Optimal Pricing, Inflation, and the Cost of Price Adjustment," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262193329, December.
    11. Ball, Laurence & Mankiw, N Gregory, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," Economic Journal, Royal Economic Society, vol. 104(423), pages 247-261, March.
    12. Eytan Sheshinski & Yoram Weiss, 1983. "Optimum Pricing Policy under Stochastic Inflation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(3), pages 513-529.
    13. Ricardo J. Caballero & Eduardo M. R. A. Engel, 1993. "Microeconomic Adjustment Hazards and Aggregate Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 359-383.
    14. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    15. Julio J. Rotemberg, 1987. "The New Keynesian Microfoundations," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 69-116, National Bureau of Economic Research, Inc.
    16. Andrew Caplin & John Leahy, 1991. "State-Dependent Pricing and the Dynamics of Money and Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 683-708.
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    Cited by:

    1. Levy, Daniel & Chen, Haipeng (Allan) & Ray, Sourav & Charette, Elliot & Ling, Xiao & Zhao, Weihong & Bergen, Mark & Snir, Avichai, 2025. "Asymmetric price adjustment over the business cycle," Economics Letters, Elsevier, vol. 254(C).

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other

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