Micro and Macro Cost-Price Dynamics in Normal Times and During Inflation Surges

Luca Gagliardone, Mark Gertler, Simone Lenzu and Joris Tielens

No 33478, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a unified approach to studying cost-price dynamics in the cross-section of firms in order to jointly explain the time series of aggregate inflation and the frequency of price changes, both during normal times and inflation surges. A key novelty is the use of microdata on firms’ prices and production costs to construct an empirical measure of price gaps—the deviation between a firm’s listed and optimal price. Conditional on the path of aggregate cost shocks extracted from the data, a state-dependent pricing model with strategic complementarities accounts well for both the linear cost-price dynamics of the pre-pandemic period and the nonlinear increase in inflation and frequency of price adjustment that followed.

JEL-codes: E0 (search for similar items in EconPapers)
Date: 2025-02
New Economics Papers: this item is included in nep-mon
Note: EFG IFM ME
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.nber.org/papers/w33478.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
Working Paper: Micro and Macro Cost-Price Dynamics in Normal Times and During Inflation Surges (2026)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:33478

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w33478
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().