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Time Rigidities In The Adjustment Of Prices To Monetary Shocks: An Analysis Of Micro Data

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  • Benjamin Eden

    (Bank of Israel)

Abstract

A store that increases the nominal price of a given good by more than other stores will tend to wait longer before it increases its nominal price again, but only by as much as 15% of the additional time interval predicted by models which assume fixed menu-type costs for changing nominal prices. This finding is based on large data sets of prices by products and stores during recent inflationary periods in Israel. It suggests that coordination-type costs are important relative to menu-type costs.

Suggested Citation

  • Benjamin Eden, 1994. "Time Rigidities In The Adjustment Of Prices To Monetary Shocks: An Analysis Of Micro Data," Bank of Israel Working Papers 1994.16, Bank of Israel.
    • Handle: RePEc:boi:wpaper:1994.16
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    References listed on IDEAS

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    1. Julio J. Rotemberg & Lawrence H. Summers, 1990. "Inflexible Prices and Procyclical Productivity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(4), pages 851-874.
    2. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 349-389, April.
    3. Bental, Benjamin & Eden, Benjamin, 1993. "Inventories in a Competitive Environment," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 863-886, October.
    4. Robert J. Barro, 1972. "A Theory of Monopolistic Price Adjustment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(1), pages 17-26.
    5. Landsburg, Steven E. & Eden, Benjamin, 1989. "On the competitive resolution of trading uncertainty," Journal of Economic Theory, Elsevier, vol. 47(1), pages 66-75, February.
    6. Stephen G. Cecchetti, 1985. "Staggered Contracts and the Frequency of Price Adjustment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 935-959.
    7. Eden, Benjamin, 1985. "Trading Uncertainty, Enforcement and Labor Unions," Economic Inquiry, Western Economic Association International, vol. 23(4), pages 637-650, October.
    8. 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.
    9. Prescott, Edward C, 1975. "Efficiency of the Natural Rate," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1229-1236, December.
    10. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 465-491.
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    Cited by:

    1. Levy, Daniel & Bergen, Mark & Dutta, Shantanu & Venable, Robert, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 112(3), pages 791-824.
    2. Levy, Daniel & Dutta, Shantanu & Bergen, Mark & Venable, Robert, 1998. "Price Adjustment at Multiproduct Retailers," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(2), pages 81-120.
    3. Dutta, Shantanu, et al, 1999. "Menu Costs, Posted Prices, and Multiproduct Retailers," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(4), pages 683-703, November.
    4. Liang Wang & Randall Wright & Lucy Qian Liu, 2020. "Sticky Prices And Costly Credit," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 37-70, February.

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