A Framework for Identifying the Sources of Local-Currency Price Stability with an Empirical Application

Pinelopi Goldberg and Rebecca Hellerstein

No 625, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: The inertia of the local-currency prices of traded goods in the face of exchange-rate changes is a well-documented phenomenon in International Economics.This paper develops a frame-work for identifying the sources of local-currency price stability at each stage of the distribution chain. The empirical approach exploits manufacturers’ and retailers’ first-order conditions in conjunction with detailed information on the frequency of price adjustments in response to exchange-rate changes, in order to quantify the relative importance of nominal price rigidities, local-cost non-traded components, and markup adjustment by manufacturers and retailers in the incomplete transmission of exchange-rate changes to prices. The approach is applied to microdata from the beer market

Keywords: menu costs; nominal rigidities; local-currency price stability (search for similar items in EconPapers)
JEL-codes: F1 F2 F3 F4 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: A Framework for Identifying the Sources of Local-Currency Price Stability with an Empirical Application (2008)
Working Paper: A framework for identifying the sources of local currency price stability with an empirical application (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed006:625

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