Working Paper: NBER ID: w15826
Authors: Peter J. Klenow; Benjamin A. Malin
Abstract: The last decade has seen a burst of micro price studies. Many studies analyze data underlying national CPIs and PPIs. Others focus on more granular sub-national grocery store data. We review these studies with an eye toward the role of price setting in business cycles. We summarize with ten stylized facts: Prices change at least once a year, with temporary price discounts and product turnover often playing an important role. After excluding many short-lived prices, prices change closer to once a year. The frequency of price changes differs widely across goods, however, with more cyclical goods exhibiting greater price flexibility. The timing of price changes is little synchronized across sellers. The hazard (and size) of price changes does not increase with the age of the price. The cross-sectional distribution of price changes is thick-tailed, but contains many small price changes too. Finally, strong linkages exist between price changes and wage changes.
Keywords: price setting; micro price data; business cycles; price stickiness
JEL Codes: E3; E31; E5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nominal shocks (E39) | individual prices (P22) |
| temporary price discounts (L42) | micro price flexibility (D41) |
| product turnover (D25) | micro price flexibility (D41) |
| economic shocks (F69) | reference prices (P22) |
| cyclicality of goods (E32) | frequency of price changes (E30) |
| age of a price (P22) | hazard rate of price changes (C41) |
| wage changes (J31) | frequency of price adjustments (E30) |