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

Price variability and price dispersion in a stable monetary environment: Evidence from German retail markets

  • Fengler, Matthias R.
  • Winter, Joachim

We investigate the relationship between inflation and price variation using highly disaggregated, weekly price data for consumption goods recorded in Germany during 1995, a low-inflation period. We find a significant positive correlation between the rates of price change and price dispersion, both at the level of individual products and product groups. However, we find no correlation between the rates of price change and price variability. Together with results from similar studies, Tommasi (1993. Optimal Pricing, Inflation, and the Cost of Price Adjustment. MIT Press: London, Cambridge, MA; 485-511) and Parsley (1996. J. Money Credit Banking 28:323-341), a remarkable pattern emerges: when aggregate nominal shocks are small, only price dispersion is correlated with price changes. As the rate of inflation rises, both variability and dispersion become affected. During hyper-inflation, systematic movements of price dispersion seem to disappear. We conclude that price dispersion is best explained by micro-economic frictions in price adjustment, whereas price variability appears to be related to costly price search and information problems. Copyright

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20338.

as
in new window

Length:
Date of creation: 2007
Date of revision:
Publication status: Published in Managerial and Decision Economics 7 28(2007): pp. 789-801
Handle: RePEc:lmu:muenar:20338
Contact details of provider: Postal: Ludwigstr. 28, 80539 Munich, Germany
Phone: +49-(0)89-2180-3405
Fax: +49-(0)89-2180-3510
Web page: http://www.vwl.uni-muenchen.de

More information through EDIRC

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. Robert J. Barro, 1976. "Unanticipated Money Growth and Unemployment in the United States," Working Papers 234, Queen's University, Department of Economics.
  2. Robert C. Feenstra & Matthew D. Shapiro, 2003. "Scanner Data and Price Indexes," NBER Books, National Bureau of Economic Research, Inc, number feen03-1, May.
  3. Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data," Macroeconomics 0402021, EconWPA.
  4. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
  5. Laurence Ball & N. Gregory Mankiw, 1992. "Relative-Price Changes as Aggregate Supply Shocks," NBER Working Papers 4168, National Bureau of Economic Research, Inc.
  6. Daniel Levy & Georg Müller & Haipeng (Allan) Chen & Mark Bergen & Shantanu Dutta, 2009. "Holiday Price Rigidity and Cost of Price Adjustment," Working Papers 2009-03, Bar-Ilan University, Department of Economics.
  7. Sheshinski, Eytan & Weiss, Yoram, 1983. "Optimum Pricing Policy under Stochastic Inflation," Review of Economic Studies, Wiley Blackwell, vol. 50(3), pages 513-29, July.
  8. Levy, Daniel, et al, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 791-825, August.
  9. David Romer, 1993. "The New Keynesian Synthesis," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 5-22, Winter.
  10. Parsley, David C, 1996. "Inflation and Relative Price Variability in the Short and Long Run: New Evidence from the United States," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(3), pages 323-41, August.
  11. Mark Bils & Peter J. Klenow & Oleksiy Kryvtsov, 2003. "Sticky prices and monetary policy shocks," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-9.
  12. Slade, Margaret E, 1998. "Optimal Pricing with Costly Adjustment: Evidence from Retail-Grocery Prices," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 87-107, January.
  13. Robert Barsky & Mark Bergen & Shantanu Dutta & Daniel Levy, 2002. "What Can the Price Gap between Branded and Private Label Products Tell Us about Markups?," Working Papers 2002-02, Bar-Ilan University, Department of Economics.
  14. Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April.
  15. Stanley Fischer, 1981. "Relative Shocks, Relative Price Variability, and Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(2), pages 381-442.
  16. Guy Debelle & Owen Lamont, 1996. "Relative Price Variability and Inflation: Evidence from US Cities," NBER Working Papers 5627, National Bureau of Economic Research, Inc.
  17. Michael F. Bryan & Stephen G. Cecchetti, 1996. "Inflation and the Distribution of Price Changes," NBER Working Papers 5793, National Bureau of Economic Research, Inc.
  18. Chang, Eric C. & Cheng, Joseph W., 2000. "Further evidence on the variability of inflation and relative price variability," Economics Letters, Elsevier, vol. 66(1), pages 71-77, January.
  19. Caplin, A. & Leahy, J., 1989. "State-Dependent Pricing And The Dynamics Of Money And Output," Discussion Papers 1989_32, Columbia University, Department of Economics.
  20. Frederick C. Mills, 1927. "Appendix to "The Behavior of Prices"," NBER Chapters, in: The Behavior of Prices, pages 441-586 National Bureau of Economic Research, Inc.
  21. Andrew C. Caplin & Daniel F. Spulber, 1987. "Menu Costs and the Neutrality of Money," NBER Working Papers 2311, National Bureau of Economic Research, Inc.
  22. Hartman, Richard, 1991. "Relative Price Variability and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 185-205, May.
  23. Dennis W. Carlton, 1986. "The Rigidity of Prices," NBER Working Papers 1813, National Bureau of Economic Research, Inc.
  24. Frederick C. Mills, 1927. "Introduction to "The Behavior of Prices"," NBER Chapters, in: The Behavior of Prices, pages 31-36 National Bureau of Economic Research, Inc.
  25. Slade, Margaret E., 1999. "Sticky prices in a dynamic oligopoly: An investigation of (s,S) thresholds," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 477-511, May.
  26. Vining, Daniel R, Jr & Elwertowski, Thomas C, 1976. "The Relationship between Relative Prices and the General Price Level," American Economic Review, American Economic Association, vol. 66(4), pages 699-708, September.
  27. 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 349-89, April.
  28. Danziger, Leif, 1987. "Inflation, Fixed Cost of Price Adjustment, and Measurement of Relative-Price Variability: Theory and Evidence," American Economic Review, American Economic Association, vol. 77(4), pages 704-13, September.
  29. Reinsdorf, Marshall, 1994. "New Evidence on the Relation between Inflation and Price Dispersion," American Economic Review, American Economic Association, vol. 84(3), pages 720-31, June.
  30. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
  31. Parks, Richard W, 1978. "Inflation and Relative Price Variability," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 79-95, February.
  32. Sheshinski, Eytan & Weiss, Yoram, 1977. "Inflation and Costs of Price Adjustment," Review of Economic Studies, Wiley Blackwell, vol. 44(2), pages 287-303, June.
  33. Frederick C. Mills, 1927. "The Behavior of Prices," NBER Books, National Bureau of Economic Research, Inc, number mill27-1, May.
  34. Mariano Tommasi, 1992. "Inflation and Relative Prices Evidence from Argentina," UCLA Economics Working Papers 661, UCLA Department of Economics.
  35. Domberger, Simon, 1987. "Relative Price Variability and Inflation: A Disaggregated Analysis," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 547-66, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:lmu:muenar:20338. 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: (Alexandra Frank)

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.