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Microdata Evidence on the Empirical Importance of Selection Effects in Menu-Cost Models
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics. Sveriges Riksbank, Stockholm, Sweden.. (Uppsala Center for Labor Studies)ORCID iD: 0000-0002-9535-4404
2017 (English)In: Journal of Money, Credit and Banking, ISSN 0022-2879, E-ISSN 1538-4616, Vol. 49, no 8, p. 1803-1830Article in journal (Refereed) Published
Abstract [en]

We use microdata on product prices linked to information on the producing firms that set them to study to what extent the timing of price changes reacts to changes in marginal cost. This self-selection of price changes is a key feature in the canonical Menu-Cost model a la Golosov and Lucas Jr. (2007), which may generate near monetary neutrality (Golosov and Lucas Jr. 2007, Karadi and Reiff 2016), but is absent in the Calvo (1983) model. We find that the microdata strongly favors the Calvo (1983) model. Thus, upstream in the supply chain, price setting is best characterized by a very low degree of self-selection into price changes.

Place, publisher, year, edition, pages
WILEY , 2017. Vol. 49, no 8, p. 1803-1830
Keywords [en]
price-setting, business cycles, microdata
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-345126DOI: 10.1111/jmcb.12450ISI: 000423044100005OAI: oai:DiVA.org:uu-345126DiVA, id: diva2:1188755
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Ragnar Söderbergs stiftelseAvailable from: 2018-03-08 Created: 2018-03-08 Last updated: 2018-03-08Bibliographically approved

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Carlsson, Mikael

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