Is Firm Pricing State or Time-Dependent? Evidence from US Manufacturing

Virgiliu Midrigan

Macroeconomics from University Library of Munich, Germany

Abstract: If firm pricing is state, rather than time-dependent, firms are more likely to change prices whenever aggregate and idiosyncratic shocks reinforce each other and trigger desired price changes in the same direction. The distribution of idiosyncratic shocks across adjusting firms therefore varies over time in response to economy-wide disturbances: in times of, say, monetary expansions, the fraction of adjusting firms that have negative idiosyncratic technology shocks should increase. Using measures of technology shocks derived from production function estimates for four-digit US manufacturing industries, we find that sectoral inflation rates are more responsive to negative, as opposed to positive technology disturbances in periods of higher economy-wide inflation, commodity price increases and expansionary monetary policy shocks. We argue, using a quantitative state-dependent sticky price model calibrated to match key features of the US micro-price data, that these results suggest that pricing is state-dependent in US manufacturing.

Keywords: state-dependent pricing; time-dependent pricing; technology shocks (search for similar items in EconPapers)
JEL-codes: E31 E32 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2005-11-01
New Economics Papers: this item is included in nep-mac and nep-tid
Note: Type of Document - pdf; pages: 43
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Citations: View citations in EconPapers (4)

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Journal Article: Is Firm Pricing State or Time Dependent? Evidence from U.S. Manufacturing (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0511005

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