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Reference Prices, Costs, and Nominal Rigidities

The American economic review, 2011-02, Vol.101 (1), p.234-262 [Peer Reviewed Journal]

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Title:
Reference Prices, Costs, and Nominal Rigidities
Author: Eichenbaum, Martin ; Jaimovich, Nir ; Rebelo, Sergio
Subjects: Consumer Price Index ; Correlation analysis ; Cost analysis ; Costs ; Datasets ; Economic costs ; Economic models ; Economic theory ; Macroeconomics ; Marginal costs ; Markups ; Measurement ; Menu costs ; Modelling ; Monetary policy ; Nominal rigidities ; Price changes ; Price elasticity ; Price instability ; Price theory ; Price volatility ; Pricing ; Retail stores ; Sales ; Standard deviation ; Statistical analysis ; Sticky prices ; Studies
Is Part Of: The American economic review, 2011-02, Vol.101 (1), p.234-262
Description: We assess the importance of nominal rigidities using a new weekly scanner dataset. We find that nominal rigidities take the form of inertia in reference prices and costs, defined as the most common prices and costs within a given quarter. Reference prices are particularly inertial and have an average duration of roughly one year, even though weekly prices change roughly once every two weeks. We document the relation between prices and costs and find sharp evidence of state dependence in prices. We use a simple model to argue that reference prices and costs are useful statistics for macroeconomic analysis.
Publisher: Nashville: American Economic Association
Language: English
Identifier: ISSN: 0002-8282
EISSN: 1944-7981
DOI: 10.1257/aer.101.1.234
CODEN: AENRAA
Source: ProQuest Central

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