The Cyclicality of Sales, Regular, and Effective Prices: Business Cycle and Policy Implications: Comment
Etienne Gagnon (),
David López-Salido and
Jason Sockin ()
American Economic Review, 2017, vol. 107, issue 10, 3229-42
Coibion, Gorodnichenko, and Hong (2015) argue that the CPI underestimates the deceleration in consumer prices during economic downturns because the index fails to account for the reallocation of consumer spending from high-price to low-price stores. We show that their conclusion hinges on some nonstandard methodological choices, including an aggressive censoring of price adjustments and a treatment for missing observations that can leave out some of the price variation. Under our preferred methodology, the regression results no longer indicate that greater store switching during downturns is a statistically or economically significant phenomenon.
JEL-codes: D12 E31 E32 L25 L81 M31 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20150891
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