The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications

Olivier Coibion, Yuriy Gorodnichenko and Gee Hee Hong

American Economic Review, 2015, vol. 105, issue 3, 993-1029

Abstract: We study the cyclical properties of sales, regular price changes, and average prices paid by consumers ("effective" prices) using data on prices and quantities sold for numerous retailers across many US metropolitan areas. Inflation in the effective prices paid by consumers declines significantly with higher unemployment while little change occurs in the inflation rate of prices posted by retailers. This difference reflects the reallocation of household expenditures across retailers, a feature of the data which we document and quantify, rather than sales. We propose a simple model with household store-switching and assess its implications for business cycles and policymakers. (JEL D12, E31, E32, L25, L81)

JEL-codes: D12 E31 E32 L25 L81 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20121546
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Related works:
Working Paper: The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications (2013)
Working Paper: The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications (2012)
Working Paper: The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications (2012)
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