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

How Frequent Are Small Price Changes?

  • Martin S. Eichenbaum
  • Nir Jaimovich
  • Sergio Rebelo
  • Josephine Smith

Recent empirical work suggests that small price changes are relatively common. This evidence has been used to criticize classic menu-cost models. In this paper, we use scanner data from a national supermarket chain and micro data from the Consumer Price Index to reassess the importance of small price changes. We argue that the vast majority of these changes are due to measurement error. We conclude that the evidence on the prevalence of small price changes is much too weak to be used as a litmus test of nominal rigidity models.

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.nber.org/papers/w17956.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17956.

as
in new window

Length:
Date of creation: Mar 2012
Date of revision:
Publication status: published as Martin Eichenbaum & Nir Jaimovich & Sergio Rebelo & Josephine Smith, 2014. "How Frequent Are Small Price Changes?," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 137-55, April.
Handle: RePEc:nbr:nberwo:17956
Note: EFG ME
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
Web page: http://www.nber.org
Email:


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. Bartosz Mackowiak & Mirko Wiederholt, 2009. "Optimal Sticky Prices under Rational Inattention," American Economic Review, American Economic Association, vol. 99(3), pages 769-803, June.
  2. Ricardo Reis, 2006. "Inattentive Producers," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 793-821.
  3. Saroj Bhattarai & Raphael Schoenle, 2010. "Multiproduct Firms and Price-Setting: Theory and Evidence from U.S. Producer Prices," Working Papers 15, Brandeis University, Department of Economics and International Businesss School.
  4. Mankiw, N. Gregory & Reis, Ricardo, 2002. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Scholarly Articles 3415324, Harvard University Department of Economics.
  5. Fernando Alvarez & Francesco Lippi, 2014. "Price Setting With Menu Cost for Multiproduct Firms," Econometrica, Econometric Society, vol. 82(1), pages 89-135, 01.
  6. repec:oup:restud:v:39:y:1972:i:1:p:17-26 is not listed on IDEAS
  7. Christian Hellwig & Ariel Burstein, 2007. "Prices and Market Shares in a Menu Cost Model," 2007 Meeting Papers 327, Society for Economic Dynamics.
  8. Mark Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," Macroeconomics 0402020, EconWPA.
  9. Andrew Caplin & John Leahy, 1991. "State-Dependent Pricing and the Dynamics of Money and Output," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 683-708.
  10. Anil K Kashyap, 1995. "Sticky Prices: New Evidence from Retail Catalogs," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 245-274.
  11. 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.
  12. Burstein, Ariel T., 2006. "Inflation and output dynamics with state-dependent pricing decisions," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1235-1257, October.
  13. Filip Matejka, 2010. "Rationally Inattentive Seller: Sales and Discrete Pricing," 2010 Meeting Papers 420, Society for Economic Dynamics.
  14. Sergio Rebelo & Nir Jaimovich & Martin Eichenbaum, 2010. "Reference Prices and Nominal Rigidities," 2010 Meeting Papers 1049, Society for Economic Dynamics.
  15. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
  16. Fernando E. Alvarez & Francesco Lippi & Luigi Paciello, 2011. "Optimal Price Setting With Observation and Menu Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1909-1960.
  17. Cavallo, Alberto & Rigobon, Roberto, 2011. "The Distribution of the Size of Price Changes," Working Papers 2011-011, Banco Central de Reserva del Perú.
  18. Mark Gertler & John Leahy, 2008. "A Phillips Curve with an Ss Foundation," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 533-572, 06.
  19. Ben Eden & Jeff Campbell, 2004. "Rigid Prices: Evidence from US scanner data," 2004 Meeting Papers 461, Society for Economic Dynamics.
  20. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 517-531.
  21. Christian Broda & David E. Weinstein, 2010. "Product Creation and Destruction: Evidence and Price Implications," American Economic Review, American Economic Association, vol. 100(3), pages 691-723, June.
  22. Robert J. Barro, 1972. "A Theory of Monopolistic Price Adjustment," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 17-26.
  23. Mikhail Golosov & Robert E. Lucas Jr., 2007. "Menu Costs and Phillips Curves," Journal of Political Economy, University of Chicago Press, vol. 115, pages 171-199.
  24. Alberto Cavallo, 2015. "Scraped Data and Sticky Prices," NBER Working Papers 21490, National Bureau of Economic Research, Inc.
  25. Rotemberg, Julio J., 2005. "Customer anger at price increases, changes in the frequency of price adjustment and monetary policy," Journal of Monetary Economics, Elsevier, vol. 52(4), pages 829-852, May.
  26. repec:oup:restud:v:49:y:1982:i:4:p:517-31 is not listed on IDEAS
  27. Woodford, Michael, 2009. "Information-constrained state-dependent pricing," Journal of Monetary Economics, Elsevier, vol. 56(S), pages S100-S124.
  28. Saul Lach & Daniel Tsiddon, 2007. "Small price changes and menu costs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 649-656.
  29. Fredrik Wulfsberg, 2009. "Price adjustments and inflation - evidence from Norwegian consumer price data 1975-2004," Working Paper 2009/11, Norges Bank.
Full references (including those not matched with items on IDEAS)

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

  1. How Frequent Are Small Price Changes? (AEJ:MA 2014) in ReplicationWiki

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17956. 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: ()

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.