Price Inertia and Inflation: Evidence and Theoretical Rationale

M. I. Nadiri
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M. I. Nadiri: New York University and Nber

Chapter 24 in Structural Change, Economic Interdependence and World Development, 1987, pp 329-357 from Palgrave Macmillan

Abstract: Abstract The phenomenon of price insensitivity to changes in demand in the advanced Western economies has been a subject of considerable discussion among macroeconomists and policy-makers. In recent years prices have not only been rigid downward but have even risen in the face of slack demand. Short-run inflexibility of prices is critical for the success of fiscal and monetary stablisation policies and the ability of economic systems to accommodate external shocks. The question is, what are the causes of price inflexibility and is this consistent with private maximisation principles? How do the dynamic interactions among various stages and types of economic activity lead to price stickiness of the aggregate price level?

Keywords: Price Change; American Economic Review; Input Price; Import Price; Price Adjustment (search for similar items in EconPapers)
Date: 1987
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DOI: 10.1007/978-1-349-18840-6_24

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