Some Evidence on the Importance of Sticky Prices

Posted: 3 Sep 2004

See all articles by Mark Bils

Mark Bils

University of Rochester - Department of Economics; National Bureau of Economic Research (NBER)

Peter J. Klenow

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

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Abstract

We examine the frequency of price changes for 350 categories of goods and services covering about 70 percent of consumer spending, on the basis of unpublished data from the Bureau of Labor Statistics for 1995-97. In comparison with previous studies, we find much more frequent price changes, with half of prices lasting less than 4.3 months. Even excluding temporary price cuts (sales), we find that half of prices last 5.5 months or less. We also find that the frequency of price changes differs dramatically across goods. Compared to the predictions of popular sticky-price models, actual inflation rates are far more volatile and transient for sticky-price goods.

Suggested Citation

Bils, Mark and Klenow, Peter J., Some Evidence on the Importance of Sticky Prices. Available at SSRN: https://ssrn.com/abstract=585764

Mark Bils

University of Rochester - Department of Economics ( email )

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Rochester, NY 14627-0158
United States

National Bureau of Economic Research (NBER)

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Peter J. Klenow (Contact Author)

Stanford University - Department of Economics ( email )

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Stanford, CA 94305-6072
United States

National Bureau of Economic Research (NBER)

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United States

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