An empirical study on price rigidity

Dixon, Huw ORCID: https://orcid.org/0000-0002-9875-8965 and Zhou, Peng ORCID: https://orcid.org/0000-0002-4310-9474 2010. An empirical study on price rigidity. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University.

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Abstract

This paper uses unpublished retailer-level microdata underlying UK consumer price indices to investigate price rigidity. Based on the conventional method, little rigidity is found in frequency of price change, since the implied price duration is only 5.5 months. However, it significantly underestimates the true duration (9.3 months) as suggested by cross-sectional method. Results also exhibit conspicuous heterogeneities in rigidity across sectors and shop types but weak difference across regions and time. The overall distribution of duration can be decomposed by sector into a decreasing component and a cyclical component with 4-month cycles. Both time and state dependent features exist in pricing. These findings support New Keynesian theories and enable a better calibration to improve the performances of macroeconomic models.

Item Type:	Monograph (Working Paper)
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Cardiff University
Date of First Compliant Deposit:	30 March 2016
Last Modified:	11 Mar 2023 03:05
URI:	https://orca.cardiff.ac.uk/id/eprint/77868

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