Working Paper: NBER ID: w9069
Authors: Mark Bils; Peter J. Klenow
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frequency of price changes for 350 categories of goods and services covering about 70% of consumer spending, based on unpublished data from the BLS for 1995 to 1997.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/
Keywords: No keywords provided
JEL Codes: E31; E32; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| frequency of price changes (E30) | volatility and persistence of inflation rates (E31) |
| market supply and demand volatility (G17) | price flexibility (D41) |
| market supply and demand volatility (G17) | inflation behavior (E31) |
| frequency of price changes (E30) | inflation behavior (E31) |