State-Dependent or Time-Dependent Pricing: Does It Matter for Recent U.S. Inflation?Pete Klenow and Oleksiy Kryvtsov () The Quarterly Journal of Economics, 2008, vol. 123, issue 3, pages 863-904 Abstract: In the 1988-2004 microdata collected by the U.S. Bureau of Labor Statistics for the Consumer Price Index, price changes are frequent (every 4-7 months, depending on the treatment of sale prices) and large in absolute value (on the order of 10%). The size and timing of price changes vary considerably for a given item, but the size and probability of a price change are unrelated to the time since the last price change. Movements in aggregate inflation reflect movements in the size of price changes rather than the fraction of items changing price, because of offsetting movements in the fraction of price increases and decreases. Neither leading time-dependent models (Taylor or Calvo) nor first-generation state-dependent models match all of these facts. Some second-generation state-dependent models, however, appear broadly consistent with the empirical patterns. (c) 2008 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.. Date: 2008 Downloads: (external link) Related works: Ordering information: This journal article can be ordered from Access Statistics for this article The Quarterly Journal of Economics is edited by Robert J. Barro, Edward L. Glaeser and Lawrence F. Katz More articles in The Quarterly Journal of Economics from MIT Press |
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