Measuring Price Selection in Microdata - It's Not There

Peter Karadi, Raphael Schoenle and Jesse Wursten

No 15383, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use microdata to estimate the strength of price selection - a key metric for the effect of monetary policy on the real economy. We find that price adjustment pressure at the product level does not significantly influence the probability of price adjustment in response to identified monetary and credit shocks, suggesting price selection is absent. This happens even though prices do respond significantly both to aggregate shocks and product-level adjustment pressure directly. Our results are broadly consistent with second-generation state-dependent pricing models and sizable effects of monetary policy on the real economy.

Keywords: Monetary non-neutrality; State-dependent pricing; Identified credit and monetary policy shocks; Price-gap proxy; Scanner data; Ppi microdata (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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Working Paper: Measuring price selection in microdata: it’s not there (2021)
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