Sales and the (Mis)Measurement of Price Level Fluctuations

41 Pages Posted: 28 Apr 2012 Last revised: 26 Oct 2018

Date Written: December 20, 2016

Abstract

I use scanner data to investigate whether temporary price reductions (“sales”) play a role in aggregate price adjustment. Sales have a large and variable impact on the growth rate of average price paid. Even after aggregating across goods and markets, the monthly growth rate of average price paid is four times as volatile as the regular price because of changes in sale frequency, depth, and quantity response. The impact of sales is positively correlated with the local unemployment rate during recessions. The CPI item indexes used to deflate nominal consumption expenditure do not fully account for variation in sale activity. I show evidence that real consumption growth was understated during the last two recessions.

Keywords: Temporary Sales, Micro Pricing, Price Setting Behavior, Inflation

JEL Classification: E31; L16

Suggested Citation

Glandon, Philip, Sales and the (Mis)Measurement of Price Level Fluctuations (December 20, 2016). Journal of Macroeconomics, Vol. 58, 2018, Available at SSRN: https://ssrn.com/abstract=2047127 or http://dx.doi.org/10.2139/ssrn.2047127

Philip Glandon (Contact Author)

Kenyon College ( email )

Gambier, OH 43022
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
58
Abstract Views
638
Rank
672,866
PlumX Metrics