We examine the frequency of price changes for 350 categories of goods and services covering about 70 percent of consumer spending, on the basis of unpublished data from the Bureau of Labor Statistics ...for 1995–97. In comparison with previous studies, we find much more frequent price changes, with half of prices lasting less than 4.3 months. Even excluding temporary price cuts (sales), we find that half of prices last 5.5 months or less. We also find that the frequency of price changes differs dramatically across goods. Compared to the predictions of popular sticky‐price models, actual inflation rates are far more volatile and transient for sticky‐price goods.
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BFBNIB, CEKLJ, INZLJ, IZUM, KILJ, NMLJ, NUK, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
This paper studies co-movements between world oil prices and global prices for corn, soybean and wheat using copulas. Several copula models with different conditional dependence structures and ...time-varying dependence parameters were considered. Empirical results for weekly data from January 1998 to April 2011 showed weak oil-food dependence and no extreme market dependence between oil and food prices. These results support the neutrality of agricultural commodity markets to the effects of changes in oil prices and non-contagion between the crude oil and agricultural markets. However, dependence increased significantly in the last three years of the sampling period, even though upper tail dependence remained insignificant, indicating that food price spikes are not caused by positive extreme oil price changes. These results have implications for policy design, risk management and hedging strategies.
► We study co-movement between food and oil markets through copulas. ► Food prices are neutral to the effects of changes in oil prices. ► Oil price spikes had no causal effect on agricultural price spikes. ► Oil–corn and oil–soybean dependence increased in recent years. ► Food subsidy policies and price controls are unnecessary to avoid extreme oil prices.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
The research explores the dynamic relationship between global crude oil price and food price indices on a sample of monthly data spanning from January 1990 to June 2017 within a nonlinear framework. ...Linear methods are applied first to examine the stationarity, co-integration and linear Granger causality of the variables of crude oil and food price indices. Moreover, a series of nonlinear tests are used to detect the nonlinearity of the univariate and oil-food prices link. Finally, the asymmetric adjustment analyses are made to understand the dynamic vary mechanism depending on the considered regime of the threshold vector autoregressive model (TVAR), and the threshold vector error correction model (TVECM) is integrated to check how the variables respond to the deviations from the equilibrium. The findings of systematic tests and analyses confirm the fact that there is a nonlinear causal relationship between global crude oil and food price indices. The co-movement of crude oil and food price has obvious structural break features, which is relevant to the underlying regime. Furthermore, the results also show that the adjustment process of the food price indices towards equilibrium is highly persistent and grows faster than oil price when a threshold is reached.
•A new framework is proposed to analyze the volatility spillover effect.•We prove that the relationship between the two is nonlinear and asymmetric.•In TVAR model, the relationship between the two is reversed in different regimes.•In the TVECM model, only the ECT is significant in the food equation of regime 2.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
We study the price rigidity of regular and sale prices, and how it is affected by pricing formats (i.e., pricing strategies). We use data from three large Canadian stores with different pricing ...formats (Every-Day-Low-Price, Hi-Lo, and Hybrid) that are located within a 1 km radius of each other. Our data contains both the actual transaction prices and actual regular prices as displayed on the store shelves. We combine these data with two “generated” regular price series (filtered prices and reference prices) and study their rigidity. Regular price rigidity varies with store formats because different format stores treat sale prices differently, and consequently define regular prices differently. Correspondingly, the meanings of price cuts and sale prices vary across store formats. To interpret the findings, we consider the store pricing format distribution across the US.
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FZAB, GIS, IJS, IZUM, KILJ, NLZOH, NUK, OILJ, PILJ, SAZU, SBCE, SBMB, UL, UM, UPUK
15.
Price Points and Price Rigidity Levy, Daniel; Lee, Dongwon; Chen, Haipeng (Allan) ...
The review of economics and statistics,
11/2011, Volume:
93, Issue:
4
Journal Article
Peer reviewed
Open access
We study the link between price points and price rigidity using two data sets: weekly scanner data and Internet data. We find that “9” is the most frequent ending for the penny, dime, dollar, and ...ten-dollar digits; the most common price changes are those that keep the price endings at “9”; 9-ending prices are less likely to change than non-9-ending prices; and the average size of price change is larger for 9-ending than non-9-ending prices. We conclude that 9-ending contributes to price rigidity from penny to dollar digits and across a wide range of product categories, retail formats, and retailers.
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Golosov and Lucas recently argued that a menu-cost model, when made consistent with salient features of the microdata, predicts approximate monetary neutrality. I argue here that their model misses, ...in fact, two important features of the data. First, the distribution of the size of price changes in the data is very dispersed. Second, in the data many price changes are temporary. I study an extension of the simple menu-cost model to a multiproduct setting in which firms face economies of scope in adjusting posted and regular prices. The model, because of its ability to replicate this additional set of microeconomic facts, predicts real effects of monetary policy shocks that are much greater than those in Golosov and Lucas and nearly as large as those in the Calvo model. Although episodes of sales account for roughly 40% of all goods sold in retail stores, the model predicts that these episodes do not contribute much to the flexibility of the aggregate price level.
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BFBNIB, FZAB, GIS, IJS, INZLJ, KILJ, NLZOH, NMLJ, NUK, OILJ, PNG, SAZU, SBCE, SBMB, UL, UM, UPUK, ZRSKP
This paper provides new insight into the relationship between inflation and the setting of individual prices by examining a large data set of Mexican consumer prices covering episodes of both low and ...high inflation. When the annual rate of inflation is low (below 10%-15%), the frequency of price changes comoves weakly with inflation because movements in the frequency of price decreases and increases partly offset each other. In contrast, the average magnitude of price changes correlates strongly with inflation because it is sensitive to movements in the relative shares of price increases and decreases. When inflation rises beyond 10%-15%, few price decreases are observed and both the frequency and average magnitude are important determinants of inflation. I show that a menu-cost model with idiosyncratic technology shocks predicts the average frequency and magnitude of price changes well over a range of inflation similar to that experienced by Mexico.
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BFBNIB, INZLJ, IZUM, KILJ, NMLJ, NUK, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
Nonlinear pricing and taxation complicate economic decisions by creating multiple marginal prices for the same good. This paper provides a framework to uncover consumers' perceived price of nonlinear ...price schedules. I exploit price variation at spatial discontinuities in electricity service areas, where households in the same city experience substantially different nonlinear pricing. Using household-level panel data from administrative records, I find strong evidence that consumers respond to average price rather than marginal or expected marginal price. This suboptimizing behavior makes nonlinear pricing unsuccessful in achieving its policy goal of energy conservation and critically changes the welfare implications of nonlinear pricing.
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BFBNIB, CEKLJ, INZLJ, IZUM, KILJ, NMLJ, NUK, ODKLJ, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
The success and expansion of the International Comparison Program (ICP) has led to an increase in interest and effort on the estimation of sub-national price levels and purchasing power parities ...(PPPs). The ICP highlighted a difficulty that large countries such as Brazil, Russia, India and China face during the price-collection phase, namely how to obtain average prices when there are large disparities in many types of expenditure categories, such as housing prices between rural and urban settings. The fact that such disparities were in evidence led to more research on within-country PPPs, or regional price parities (RPPs). The difference between a RPP and the PPPs is simply that the former are in the same currency, while PPPs are usually converted to a reference country or currency by the exchange rate, such as the United States Dollar or the Euro. This paper describes the methodology used to estimate the RPPs within the United States, and shows their effect on measures of income adjusted to constant dollars, termed real regional incomes.
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