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The determinants of price rigidity in the UK: Analysis of the CPI and PPI microdata and application to macrodata modelling

Zhou, Peng and Dixon, Huw 2019. The determinants of price rigidity in the UK: Analysis of the CPI and PPI microdata and application to macrodata modelling. Manchester School 87 (5) , pp. 640-677. 10.1111/manc.12263
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Abstract

This paper investigates price rigidity in UK consumer and producer markets, by estimating the hazard functions of price changes in microdata which are then used in macrodata modelling. We explore the mechanism of price setting using survival analysis in order to see what factors drive the observed price rigidity. We find significant effects of macroeconomic variables such as inflation and output, which should be purged off before calibrating any macroeconomic models. The microdata findings are then used to estimate and simulate a heterogeneous price setting model (generalised Calvo and Taylor), which improves the performance in matching macrodata persistence.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Wiley-Blackwell
ISSN: 1463-6786
Date of First Compliant Deposit: 25 January 2019
Date of Acceptance: 29 September 2018
Last Modified: 18 Oct 2019 00:21
URI: http://orca.cf.ac.uk/id/eprint/118831

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