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A State-Dependent Model of Intermediate Goods Pricing

  • Brent Neiman

Recent analyses of transaction-level datasets have generated new stylized facts on price setting and greatly influenced the empirical open- and closed-economy macroeconomics literatures. This work has uncovered marked heterogeneity in price stickiness, demonstrated that even non-zero price changes do not fully "pass through" exchange rate shocks, and offered evidence of synchronization in the timing of price changes. Further, intrafirm prices have been shown to differ from arm's length prices in each of these characteristics. This paper develops a state-dependent model of intermediate goods pricing, which allows for arm's length and intrafirm transactions, and is capable of generating these empirical pricing patterns.

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File URL: http://www.nber.org/papers/w16283.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16283.

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Date of creation: Aug 2010
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Publication status: published as Brent, Neiman, 2011. "A state-dependent model of intermediate goods pricing," Journal of International Economics, Elsevier, vol. 85(1), pages 1-13, September.
Handle: RePEc:nbr:nberwo:16283
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