Price-price deviations are highly persistent - extended version

Andrea Vaona

No 08/2012, Working Papers from University of Verona, Department of Economics

Abstract: The present paper explores the persistence of the deviations between market prices on one side and either production or direct prices on the other - namely their tendency to vanish after being hit by a shock. We consider various countries - Austria, Denmark, Italy, Norway and Japan - across different time periods and different methods of computing direct and production prices. Results can change depending on such methods, but even the weakest results would point to price-price deviations taking 5 years to shrink by one half after a shock. The strongest results, instead, show no tendency of price-price deviations to disappear.

Keywords: market prices; direct prices; production prices; deviations; persistence; dynamic panel data methods (search for similar items in EconPapers)
Pages: 31
Date: 2012-03
New Economics Papers: this item is included in nep-hme
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