Stuck at Zero: Price Rigidity in a Runaway Inflation

25 Pages Posted: 28 Apr 2021 Last revised: 3 May 2021

See all articles by Avichai Snir

Avichai Snir

Netanya Academic College

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics

Daniel Levy

Bar-Ilan University - Department of Economics; Emory University - Department of Economics; Rimini Centre for Economic Analysis; International Centre for Economic Analysis; International School of Economics at Tbilisi State University

Date Written: April 27, 2021

Abstract

We use micro level retail price data from convenience stores to study the link between 0-ending price points and price rigidity during a period of a runaway inflation, when the annual inflation rate was in the range of 60%–430%. Surprisingly, we find that more round prices are less likely to adjust, and when they do adjust, the average adjustments are larger. These findings suggest that price adjustment barriers associated with round prices are strong enough to cause a systematic delay in price adjustments even in a period of a runaway inflation, when 85 percent of the prices change every month.

Keywords: Sticky Prices, Rigid Prices, 0-Ending Price Points, 9-Ending Price points, Runaway Inflation, Hyperinflation, Cost of Price Adjustment, Menu Cost

JEL Classification: D40, E31, L10, L16, M20, M30

Suggested Citation

Snir, Avichai and Chen, Haipeng (Allan) and Levy, Daniel, Stuck at Zero: Price Rigidity in a Runaway Inflation (April 27, 2021). Economics Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3835261

Avichai Snir

Netanya Academic College ( email )

1 University St
Netanya 42100, 4223587
Israel

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

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/biography/levy-daniel.html

Rimini Centre for Economic Analysis ( email )

Rimini
Italy

HOME PAGE: http://https://www.rcea.world/

International Centre for Economic Analysis ( email )

Wilfrid Laurier University
75 University Ave W.
Waterloo, Ontario N2L3C5
Canada

HOME PAGE: http://https://iceanet.org/

International School of Economics at Tbilisi State University ( email )

16 Zandukeli Street
Tbilisi, 0108
Georgia

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