Yesterday's Bad Times Are Today's Good Old Times: Retail Price Changes Are More Frequent Today Than in the 1890s

Journal of Money, Credit and Banking, 2007, vol. 39, issue 8, pages 1987-2020

Abstract: This paper documents differences in the nominal rigidity of retail prices across two 28-month periods: 1889-91 and 1997-99. The most striking finding is that prices changed much less frequently in 1889-91. In the late-1800s when price changes did occur they were smaller on average and more narrowly distributed with fewer small or large price changes. Further, price changes were more permanent 100-plus years ago. These differences are consistent with a high occurrence of temporary price shocks and a higher cost of changing prices in 1889-91 than in 1997-99. Copyright 2007 The Ohio State University.

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