Asymmetric Price Adjustment: Cross‐Industry Evidence

Several studies document asymmetric price adjustment in gasoline and agricultural markets. Do these results extend to other subsectors of the economy? This paper investigates the existence of asymmetric price adjustment in 269 6‐digit North American Industrial Classification System (NAICS) industries using quarterly financial data from 1966–2006. Results, which are consistent with the previous literature, show that positive price asymmetry is frequent in nondurable goods and natural resource manufacturing. However, price asymmetry is not readily evident in mining, durable goods manufacturing, and service sectors. The differing results may best be explained by theoretical explanations of price asymmetry based on inventory management.