The Frequency and Costs of Individual Price Adjustment
FRB Richmond Economic Quarterly, Vol. 86, No. 4, Fall 2000, pp. 1-22
22 Pages Posted: 28 Nov 2012
Date Written: 2000
How often do the nominal prices of individual goods change? What is the nature and magnitude of costs of price adjustment? Economists seeking to construct macroeconomic models useful for monetary policy analysis must know the answers to these questions. The empirical literature reveals that many prices change infrequently, in part because of physical costs of price adjustment. However, infrequent price adjustment also seems to be related to long-term buyer-seller relationships in ways that are not yet well understood.
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