Asymmetric Adjustments of Price and Output

FRB Finance and Econ. Disc. Series #97-31

31 Pages Posted: 20 Oct 1997

See all articles by Peter A. Tinsley

Peter A. Tinsley

George Washington University; Birkbeck College, Univ. of London

Reva Krieger

affiliation not provided to SSRN

Date Written: June 12, 1997

Abstract

Asymmetries in price adjustment can reconcile contrasts between rapid price movements in inflationary episodes, consistent with classical theories of flexible pricing, and sluggish price responses in contractions, consistent with Keynesian theories of sticky price adjustments. Nonparametric analysis of SIC two-digit industry data indicates that negative asymmetries are more pronounced for real outputs than for nominal outputs, suggesting reversed positive asymmetries in producer pricing. Pricing decision rules are estimated to distinguish between asymmetries in conditioning shocks and asymmetries in producer responses. Two rational motives for asymmetric pricing are supported.

JEL Classification: E3

Suggested Citation

Tinsley, Peter A. and Krieger, Reva F., Asymmetric Adjustments of Price and Output (June 12, 1997). FRB Finance and Econ. Disc. Series #97-31, Available at SSRN: https://ssrn.com/abstract=36774 or http://dx.doi.org/10.2139/ssrn.36774

Peter A. Tinsley (Contact Author)

George Washington University ( email )

710 21st Street NW
Washington, DC 20052
United States

Birkbeck College, Univ. of London

Malet Street
London, WC1E 7HX
United Kingdom

Reva F. Krieger

affiliation not provided to SSRN