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Price Rigidity: A Survey of Evidence From Micro-Level Data

  • Craigwell, Roland
  • Moore, Winston
  • Morris, Diego
  • Worrell, DeLisle

Over the last decade or more micro price studies have proliferated. In this paper a survey of this literature reveals alternative theoretical explanations of sticky prices: (a) sellers review and change prices only at predetermined intervals (except under extraordinary circumstances), so that any price reaction appears only when that time arrives (referred to as “time dependent pricing”); or (b) prices are always reviewed after a shock or policy move (“state dependent pricing”), but may be altered only if the difference between the actual and the new target price is sufficient to warrant an adjustment. The empirical evidence is that prices take longer to change in developed countries than in developing economies. In addition, the frequency of price movements differs widely across goods and the timing of price changes is not synchronized across sellers.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40927.

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Date of creation: 2011
Date of revision:
Handle: RePEc:pra:mprapa:40927
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  1. Josef Baumgartner & Ernst Glatzer & Fabio Rumler & Alfred Stiglbauer, 2005. "How Frequently Do Consumer Prices Change in Austria? Evidence from Micro CPI Data," Working Papers 101, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Peter J. Klenow & Oleksiy Kryvtsov, 2005. "State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?," NBER Working Papers 11043, National Bureau of Economic Research, Inc.
  3. Quah, Danny, 1995. "Measuring Core Inflation," CEPR Discussion Papers 1153, C.E.P.R. Discussion Papers.
  4. Nath, Hiranya K., 2004. "Inflation and relative price variability: short-run vs. long-run," Economics Letters, Elsevier, vol. 82(3), pages 363-369, March.
  5. Martin Bodenstein & Christopher J. Erceg & Luca Guerrieri, 2008. "Optimal monetary policy with distinct core and headline inflation rates," International Finance Discussion Papers 941, Board of Governors of the Federal Reserve System (U.S.).
  6. Álvarez, L. & Dhyne, E. & Hoeberichts, M. & Kwapil, C. & Le Bihan, H. & Lünnemann, P. & Martins, F. & Sabbatini, R. & Stahl,H. & Vermeulen, P. & Vilmunen, J., 2005. "Sticky Prices in the Euro Area: A Summary of New Micro Evidence," Working papers 138, Banque de France.
  7. Baudry, L. & Le Bihan, H. & Sevestre, P. & Tarrieu, S., 2004. "Price Rigidity. Evidence from the French CPI Macro-Data," Working papers 113, Banque de France.
  8. Laurence Ball & David Romer, 1987. "Sticky Prices as Coordination Failure," NBER Working Papers 2327, National Bureau of Economic Research, Inc.
  9. Danny Quah & Danny Quah & Shaun P. Vahey, 1995. "Measuring Core Inflation," CEP Discussion Papers dp0254, Centre for Economic Performance, LSE.
  10. Dias, Mónica & Dias, Daniel & Neves, Pedro D., 2004. "Stylised features of price setting behaviour in Portugal: 1992-2001," Working Paper Series 0332, European Central Bank.
  11. Aoki, Kosuke, 2001. "Optimal monetary policy responses to relative-price changes," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 55-80, August.
  12. repec:oup:qjecon:v:114:y:1999:i:2:p:655-690 is not listed on IDEAS
  13. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  14. Konieczny, Jerzy D. & Skrzypacz, Andrzej, 2005. "Inflation and price setting in a natural experiment," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 621-632, April.
  15. Luc Aucremanne & Guy Brys & Peter J Rousseeuw & Anja Struyf & Mia Hubert, 2003. "Inflation, relative prices and nominal rigidities," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 81-105 Bank for International Settlements.
  16. Apel, Mikael & Friberg, Richard & Hallsten, Kerstin, 2005. "Microfoundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 313-38, April.
  17. Aucremanne, Luc & Dhyne, Emmanuel, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 0331, European Central Bank.
  18. repec:oup:qjecon:v:110:y:1995:i:1:p:245-74 is not listed on IDEAS
  19. Peter J. Klenow & Benjamin A. Malin, 2010. "Microeconomic Evidence on Price-Setting," NBER Working Papers 15826, National Bureau of Economic Research, Inc.
  20. Simon Hall & Mark Walsh & Anthony Yates, 1997. "How do UK companies set prices?," Bank of England working papers 67, Bank of England.
  21. Simon Hall & Anthony Yates, 1998. "Are there downward nominal rigidities in product markets?," Bank of England working papers 80, Bank of England.
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