Work

The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications

Year: 2015

Type: article

Abstract: We study the cyclical properties of sales, regular price changes, and average prices paid by consumers (“effective” prices) using data on prices and quantities sold for numerous retailers across many US metropolitan areas. Inflation in the effective prices paid by consumers declines significantly with higher unemployment while little change occurs in the inflation rate of prices posted by retailers. This difference reflects the reallocation of household expenditures across retailers, a feature of the data which we document and quantify, rather than sales. We propose a simple model with household store-switching and assess its implications for business cycles and policymakers. (JEL D12, E31, E32, L25, L81)

Source: American Economic Review

DOI: 10.1257/aer.20121546

Authors: Olivier Coibion, Yuriy Gorodnichenko, Gee Hee Hong

Institutions: The University of Texas at Austin, University of California, Berkeley, International Monetary Fund

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W1503799017

FWCI: 50.55

Cites: 53

Cited by: 175

Related to: 10