Inflationary Expectations and Price Setting Behavior

Ray Fair ()

The Review of Economics and Statistics, 1993, vol. 75, issue 1, 8-18

Abstract: This paper tests for the existence of expectational effects in very disaggregate price equations. Price equations are estimated using monthly data for each of forty products. The dynamic specification of the equations is also tested, including whether the equations should be specified in level form or in change form. The results support the hypothesis that aggregate price expectations aff ect individual pricing decisions. The results do not discriminate very w ell between the level and change forms of the price equation, although there is a slight edge for the level form. The lag and lead lengths are not estimated precisely. The average lag length is about thirty-eigh t months, and the average lead length is about five months. Copyright 1993 by MIT Press.

Date: 1993
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Working Paper: Inflationary Expectations and Price Setting Behavior (1989)
Working Paper: Inflationary Expectations and Price Setting Behavior (1989)
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