How frequent are small price changes?

Martin Eichenbaum, Nir Jaimovich, Sergio Rebelo, Josephine Smith

Research output: Contribution to journalArticle

28 Scopus citations

Abstract

Recent empirical work suggests that small price changes are relatively common. This evidence has been used to criticize classic menu-cost models. In this paper, we use scanner data from a national supermarket chain and micro data from the Consumer Price Index to reassess the importance of small price changes. We argue that the vast majority of these changes are due to measurement error. We conclude that the evidence on the prevalence of small price changes is much too weak to be used as a litmus test of nominal rigidity models.

Original languageEnglish (US)
Pages (from-to)137-155
Number of pages19
JournalAmerican Economic Journal: Macroeconomics
Volume6
Issue number2
DOIs
StatePublished - Apr 2014

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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