The Cyclicality of Sales, Regular and Effective Prices: Comment

López-Salido, J David, Etienne Gagnon and Jason Sockin
Authors registered in the RePEc Author Service: J. David Lopez-Salido

No 10726, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Coibion, Gorodnichenko, and Hong (2015) argue that the CPI underestimates the deceleration in consumer prices during economic downturns because the index fails to account for the reallocation of consumer spending from high- to low-price stores. We show that these authors' measures of inflation with and without store switching suffer from several methodological deficiencies, including an excessive truncation of price adjustments and the lack of a treatment for missing observations. When we address these deficiencies, the authors' key regression results no longer suggest that greater store switching during downturns is a statistically or economically significant phenomenon.

Keywords: Effective prices; Inflation measurement; Outlet substitution bias (search for similar items in EconPapers)
JEL-codes: D12 E31 E32 (search for similar items in EconPapers)
Date: 2015-07
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: Comment (2017)
Working Paper: The Cyclicality of Sales, Regular and Effective Prices: Comment (2015)
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