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Asymmetric price adjustment in a menu-cost model |
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| Authors: | Jakob B Madsen Bill Z Yang |
| Institution: | (1) Present address: Department of Economics, University of Western Australia, 6907 Nedlands, Western Australia, Australia;(2) Present address: Division of Social Science, Minot State University, 58707 Minot, ND, USA |
| Abstract: | In this paper we demonstrate that the menu-cost model implies that prices adjust asymmetrically to nominal-demand shocks and that the asymmetry is linked to the elasticity of demand as well as menu costs. These implications are tested using manufacturing and retailing panel data for the OECD countries. The empirical results give some support for the menu-cost model. |
| Keywords: | menu costs asymmetric price adjustment panel data manufacturing prices retail prices |
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