EconPapers    
Economics at your fingertips  
 

Unobserved heterogeneity in price-setting behavior: A duration analysis approach

Takayasu Matsuoka

Japan and the World Economy, 2010, vol. 22, issue 1, pages 13-20

Abstract: There is strong empirical evidence that the degree of price stickiness differs across commodity items, and that the nonparametric hazard function of price changes is downward-sloping with some spikes. We introduce item-specific heterogeneity into the standard single-sector model of Calvo [Calvo, G., 1983. Staggered prices in a utility-maximizing framework. Journal of Monetary Economics 12 (3), 383-398]. By allowing the hazard rate of price changes to vary across items, we show that the decreasing nonparametric hazard function is well described except for the characteristic peaks at 1, 12, 24, and 36 months. We reject the hypothesis that the degree of price stickiness is the same across the items at 1 percent of significance. In the presence of item-specific heterogeneity, the probability that prices remain unchanged for long periods is higher than the single-sector model predicts.

Keywords: Sticky; prices; Hazard; function; Unobserved; heterogeneity (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6VF1 ... 32f06d8fa7d521d3344a
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:japwor:v:22:y:2010:i:1:p:13-20

Access Statistics for this article

Japan and the World Economy is edited by Robert Dekle and Yasushi Hamao

More articles in Japan and the World Economy from Elsevier
Series data maintained by Zhang, Lei ().

 
Page updated 2013-12-22
Handle: RePEc:eee:japwor:v:22:y:2010:i:1:p:13-20