Measuring Price Selection in Microdata - it's Not There

44 Pages Posted: 3 Nov 2020

See all articles by Peter Karadi

Peter Karadi

European Central Bank (ECB)

Raphael Schoenle

Brandeis University

Jesse Wursten

KU Leuven, Faculty of Business and Economics (FEB), Students; University of California, Berkeley

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Date Written: October 2020

Abstract

We use microdata to estimate the strength of price selection - a key metric for the effect of monetary policy on the real economy. We find that price adjustment pressure at the product level does not significantly influence the probability of price adjustment in response to identified monetary and credit shocks, suggesting price selection is absent. This happens even though prices do respond significantly both to aggregate shocks and product-level adjustment pressure directly. Our results are broadly consistent with second-generation state-dependent pricing models and sizable effects of monetary policy on the real economy.

Keywords: identified credit and monetary policy shocks, monetary non-neutrality, PPI microdata, price-gap proxy, scanner data, State-dependent pricing

JEL Classification: E31, E32, E52

Suggested Citation

Karadi, Peter and Schoenle, Raphael and Wursten, Jesse, Measuring Price Selection in Microdata - it's Not There (October 2020). CEPR Discussion Paper No. DP15383, Available at SSRN: https://ssrn.com/abstract=3723575

Peter Karadi (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Raphael Schoenle

Brandeis University ( email )

Waltham, MA 02454
United States

Jesse Wursten

KU Leuven, Faculty of Business and Economics (FEB), Students ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

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