The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data

Saul Lach and Daniel Tsiddon

Journal of Political Economy, 1992, vol. 100, issue 2, 349-89

Abstract: This paper analyzes the effects of inflation on the dispersion of prices, and other aspects of price behavior, using disaggregated data on prices of foodstuffs in Israel during 1978-84. The authors find that expected inflation has a stronger effect on intramarket price variability than unexpected inflation. They show that even in times of high inflation price quotations are not trivially short and that price changes are not synchronized across firms. These facts, taken together, confirm that there is some staggering in the setting of prices. The authors find that the distribution of real prices is not uniform as many menu cost-based models assume or conclude. Copyright 1992 by University of Chicago Press.

Date: 1992
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