Interindustry Linkages and the Timing of Price Adjustment

Sangjin Jung
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Sangjin Jung: Hyupsung University

Korean Economic Review, 2001, vol. 17, 149-162

Abstract: The gradual adjustment of the aggregate price level has been attributed to the driving force of fluctuation of output in Keynesian macroeconomics. The staggering timing pattern in price adjustment contributes to the inertia in the aggregate price level. This paper incorporates input-output relation into price setting firms in order to demonstrate that the staggered price setting is a stable equilibrium. The timing pattern in price setting is explained by two elements: heterogeneous inputs and information asymmetry. The result suggests that an input-output system has a hierarchical structure when staggering pattern arises. On the other hand, staggering is not likely to take place when each industry is not linked to other industries.

Keywords: business cycle; interindustry linkages; staggered price adjustment (search for similar items in EconPapers)
JEL-codes: E3 (search for similar items in EconPapers)
Date: 2001
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