Some Evidence on the Importance of Sticky Prices

Mark Bils and Pete Klenow

No 9069, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the frequency of price changes for 350 categories of goods and services covering about 70% of consumer spending, based on unpublished data from the BLS for 1995 to 1997. Compared with previous studies we find much more frequent price changes, with half of prices lasting less than 4.3 months. The frequency of price changes differs dramatically across categories. We exploit this variation to ask how inflation for 'flexible-price goods' (goods with frequent changes in individual prices) differs from inflation for 'sticky-price goods' (those displaying infrequent price changes). Compared to the predictions of popular sticky price models, actual inflation rates are far more volatile and transient, particularly for sticky-price goods. The data appendix for this paper can be found at http://www.nber.org/data-appendix/w9069/

JEL-codes: E31 E32 (search for similar items in EconPapers)
Date: 2002-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-pke
Note: EFG
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Citations: View citations in EconPapers (127)

Published as Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.

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