Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data

Posted: 21 Mar 2003  

Daniel Levy

Bar-Ilan University - Department of Economics; Emory University - Department of Economics; Rimini Center for Economic Analysis

Shantanu Dutta

University of Southern California - Marshall School of Business

Mark E. Bergen

University of Minnesota - Carlson School of Management

Abstract

We combine two data sets to study price rigidity. The first consists of weekly time series of retail, wholesale, and spot prices for twelve products. These time series contain two exogenous cost shocks. We find that prices exhibit more rigidity in response to the second shock than the first. The second data set consists of all publicly available information about the shocks. Content analysis of these information reveals that the first shock is larger and more persistent, and the market has more information on it than the second. We conclude, therefore, that prices are more flexible in response to cost shocks that are larger, that are more persistent, and on which market participants have more information.

Keywords: Price Rigidity, Micro-Level Data, Retail Prices, Wholesale Prices, Exogeneous Cost Shocks, Information, Shock Persistence, Size of Shock, Flexible Prices

JEL Classification: E12, E31, L16

Suggested Citation

Levy, Daniel and Dutta, Shantanu and Bergen, Mark E., Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data. Journal of Money, Credit and Banking, Vol. 34, No. 1, pp. 197-220, February 2002. Available at SSRN: https://ssrn.com/abstract=372860

Daniel Levy (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 5290002
Israel
+972 3 531-8345 (Phone)
+972 3 738-4034 (Fax)

HOME PAGE: http://econ.biu.ac.il/en/levy

Emory University - Department of Economics ( email )

1602 Fishburne Drive, Suite 306
Rich Building
Atlanta, GA 30322-0001
United States

HOME PAGE: http://economics.emory.edu/home/people/faculty/Levydaniel.html

Rimini Center for Economic Analysis ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

HOME PAGE: http://www.rcfea.org/

Shantanu Dutta

University of Southern California - Marshall School of Business ( email )

Hoffman Hall 701
Los Angeles, CA 90089-1427
United States
213-740-5038 (Phone)
213-740-7828 (Fax)

Mark E. Bergen

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
612-624-1821 (Phone)

Paper statistics

Abstract Views
935