On the Source of Seasonality in Price Changes: The Role of Seasonality in Menu Costs

Ko Munakata, Takeshi Shinohara, Shigenori Shiratsuka (), Nao Sudo and Tsutomu Watanabe
Additional contact information
Ko Munakata: Financial System and Bank Examination Department, Bank of Japan
Takeshi Shinohara: Institute for Monetary and Economic Studies, Bank of Japan
Nao Sudo: Institute for Monetary and Economic Studies, Bank of Japan
Tsutomu Watanabe: Graduate School of Economics, University of Tokyo

No 2023-016, Keio-IES Discussion Paper Series from Institute for Economics Studies, Keio University

Abstract: Seasonality is among the most salient features of price changes, but it is notably less analyzed than seasonality of quantities and the business cycle component of price changes. To fill this gap, we use the scanner data of 199 categories of goods in Japan to empirically study the seasonality of price changes from 1990 to 2021. We find that the following four features generally hold for most categories: (1) The frequency of price increases and decreases rises in March and September; (2) Seasonal components of the frequency of price changes are negatively correlated with those of the size of price changes; (3) Seasonal components of the inflation rate track seasonal components of net frequency of price changes; (4) The seasonal pattern of the frequency of price changes is stable relative to that of the size of price changes. The pattern is, however, responsive to changes in the category-level annual inflation rate for the year. We conduct a simulation analysis using a simple state-dependent price model and show seasonal cycles in menu costs play an essential role in generating seasonality of price changes in the data. We then discuss the nature of seasonal cycles in menu costs and their implications for macroeconomic dynamics.

Keywords: Scanner Data; Seasonality in Price Changes; New Keynesian Model; Menu Costs (search for similar items in EconPapers)
JEL-codes: E31 E32 E37 (search for similar items in EconPapers)
Pages: 78 pages
Date: 2023-11-30
New Economics Papers: this item is included in nep-mac and nep-mon
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https://ies.keio.ac.jp/upload/DP2023-016_EN.pdf (application/pdf)

Related works:
Working Paper: On the Source of Seasonality in Price Changes: The Role of Seasonality in Menu Costs (2024)
Working Paper: On the Source of Seasonality in Price Changes: The Role of Seasonality in Menu Costs (2024)
Working Paper: On the Source of Seasonality in Price Changes: The Role of Seasonality in Menu Costs (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:keo:dpaper:2023-016

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