Working Paper: NBER ID: w29236
Authors: Laura Leal; Haaris Mateen; Makoto Nirei; Jos A. Scheinkman
Abstract: Nirei and Scheinkman (2021) proposed an equilibrium model of price adjustments with menu-costs with a finite number of firms and derived a “reproduction number” for repricing and a limit functional form for the distribution of the number of simultaneously price-adjusting firms. We show that the distribution of price-changes in data from the Billion Prices Project is well fitted by this functional form and exhibits a reproduction number that is close to unity, indicating that complementarity in price-changes plays a major role in repricings.
Keywords: No keywords provided
JEL Codes: E31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Calvo shocks (E32) | avalanches of price changes (E30) |
| avalanches of price changes (E30) | complementarity in repricing (G19) |
| complementarity in price changes (D10) | distribution of price changes (D39) |
| Calvo shocks (E32) | price adjustment threshold (D40) |
| price adjustment threshold (D40) | firms adjusting prices (L11) |
| firms adjusting prices (L11) | distribution of daily avalanches of price increases (D39) |
| distribution of price changes (D39) | theoretical model fit (C52) |