Understanding Price Stickiness: Firm‐level Evidence on Price Adjustment Lags and Their Asymmetries |
| |
| Authors: | Daniel A Dias Carlos Robalo Marques Fernando Martins J M C Santos Silva |
| |
| Affiliation: | 1. Department of Economics, University of Illinois at Urbana‐Champaign and CEMAPRE, Urbana, IL, USA;2. Banco de Portugal, Lisboa, Portugal;3. Banco de Portugal, ISEG/University of Lisbon, and Universidade Lusíada de Lisboa, Lisboa, Portugal;4. University of Essex and CEMAPRE, Wivenhoe Park, Colchester, UK |
| |
| Abstract: | We study the speed of price reactions to positive and negative demand and cost shocks. Our findings suggest that price adjustment lags vary in line with the predictions of optimal price setting models. Moreover, we find that the firms' reactions are asymmetric, and that these asymmetries cannot be fully explained by any single theoretical model of asymmetric price adjustment. Overall, these results suggest that the reaction to monetary policy shocks may depend on which firms or sectors are particularly affected by them and, therefore, that richer models are needed to fully understand the effects of monetary policy. |
| |
| Keywords: | |
|
|
