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Temporal Distribution of Price Changes: Staggering in the Large and Synchronization in the Small

  • Emmanuel Dhyne

    ()

    (National Bank of Belgium and Centre de Recherche WarocquŽ, UniversitŽ de Mons-Hainaut, Belgium)

  • Jerzy Konieczny

    ()

    (Wilfrid Laurier University, Waterloo, Ont., Canada and The Rimini Centre for Economic Analysis, Rimini, Italy)

Temporal distribution of individual price changes is of crucial importance for business cycle theory and for the microfoundations of price adjustment. While it is routinely assumed that price changes are staggered over time, both theory and evidence are ambiguous. We use a large Belgian data set to analyze whether price changes are staggered or synchronized. We find that the more aggregated are the data, the closer is the distribution to perfect staggering. This result holds both for aggregation across goods, and across locations. Our results provide support for BhaskarÕs (2002) model of synchronized adjustment within, and staggered adjustment across, industries.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 01-07.

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Date of creation: Jul 2007
Date of revision: Jul 2007
Handle: RePEc:rim:rimwps:01-07
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  9. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
  10. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
  11. Laurence Ball & Stephen G. Cecchetti, 1986. "Imperfect information and staggered price setting," Research Working Paper 86-08, Federal Reserve Bank of Kansas City.
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  15. 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.
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  17. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  18. Fisher, Timothy C. G. & Konieczny, Jerzy D., 2000. "Synchronization of price changes by multiproduct firms: evidence from Canadian newspaper prices," Economics Letters, Elsevier, vol. 68(3), pages 271-277, September.
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