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The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications

Olivier Coibion, Yuriy Gorodnichenko and Gee Hong

Staff Working Papers from Bank of Canada

Abstract: We study the cyclical properties of sales, regular price changes and average prices paid by consumers (“effective” prices) using data on prices and quantities sold for numerous retailers across many U.S. metropolitan areas. Inflation in the effective prices paid by consumers declines significantly with higher unemployment while little change occurs in the inflation rate of prices posted by retailers. This difference reflects the reallocation of household expenditures across retailers, a feature of the data which we document and quantify, rather than sales. We propose a simple model with household store-switching and assess its implications for business cycles and policymakers.

Keywords: Inflation and prices; Monetary policy framework; Transmission of monetary policy (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2013
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications (2015) Downloads
Working Paper: The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications (2012) Downloads
Working Paper: The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:13-1

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