Economics at your fingertips  

Menu costs and information rigidity: Evidence from the consumption tax hike in Japan

Toshiaki Shoji

Journal of Macroeconomics, 2022, vol. 72, issue C

Abstract: Pre-announced consumption tax changes can provide an opportunity for firms to reset their prices, which potentially leads to an economic stimulus. To test this argument, I examine firms’ price-setting behavior in response to Japan’s consumption tax hike in 2014. I find that prices became less sticky after the tax hike, suggesting that firms paid menu costs when passing through the tax hike to their prices. Nonetheless, I find that more than half of prices remained constant on a tax-excluded basis after the tax hike. This finding suggests that another factor prevented firms from adjusting their prices, though they paid menu costs.

Keywords: Price stickiness; Tax-included and tax-excluded prices; Consumption tax pass-through; Zero lower bound (search for similar items in EconPapers)
JEL-codes: E31 E62 H32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jmacro.2022.103400

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2022-07-09
Handle: RePEc:eee:jmacro:v:72:y:2022:i:c:s0164070422000040