Individual Price Adjustment along the Extensive Margin

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

No 9143, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Firms employ a rich variety of pricing strategies whose implications for aggregate price dynamics often diverge. This situation poses a challenge for macroeconomists interested in bridging micro and macro price stickiness. In responding to this challenge, we note that differences in macro price stickiness across pricing mechanisms can often be traced back to price changes that are either triggered or cancelled by shocks. We exploit observed micro price behavior to quantify the importance of this margin of adjustment for the response of inflation to shocks. Across a range of empirical exercises, we find strong evidence that changes in the timing of price adjustments contribute significantly to the flexibility of the aggregate price level.

Keywords: Extensive margin; inflation; Intensive margin (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Chapter: Individual Price Adjustment along the Extensive Margin (2012)
Working Paper: Individual price adjustment along the extensive margin (2012)
Working Paper: Individual Price Adjustment along the Extensive Margin (2012)
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