Aggregation and the Staggering of Price Changes

25 Pages Posted: 26 Feb 2014

Date Written: April 2014

Abstract

Temporal distribution of individual price changes is of crucial importance for business cycle theory and for the microfoundations of price adjustment. While it is routinely assumed that price changes are staggered over time, both theory and evidence are ambiguous. We use a large Belgian data set to analyze whether price changes are staggered or synchronized. We find that the more aggregated are the data, the closer is the distribution to perfect staggering. The results hold both for aggregation across products, and across locations. They are consistent with an economy in which idiosyncratic shocks are the main cause of price changes.

JEL Classification: E30, E31, D40

Suggested Citation

Dhyne, Emmanuel, Aggregation and the Staggering of Price Changes (April 2014). Economic Inquiry, Vol. 52, Issue 2, pp. 732-756, 2014. Available at SSRN: https://ssrn.com/abstract=2401414 or http://dx.doi.org/10.1111/ecin.12072

Emmanuel Dhyne (Contact Author)

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

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