1,471 research outputs found
Why are Prices Sticky? Evidence from Business Survey Data
This paper offers new insights on the price setting behaviour of German retail firms using a novel dataset that
consists of a large panel of monthly business surveys from 1991-2006. The firm-level data allows matching changes
in firms' prices to several other firm-characteristics. Moreover, information on price expectations allow analyzing
the determinants of price updating. Using univariate and bivariate ordered probit specifications, empirical menu
cost models are estimated relating the probability of price adjustment and price updating, respectively, to both
time- and state- dependent variables. First, results suggest an important role for state-dependence; changes in
the macroeconomic and institutional environment as well as firm-specific factors are significantly related to the
timing of price adjustment. These findings imply that price setting models should endogenize the timing of price
adjustment in order to generate realistic predictions concerning the transmission of monetary policy. Second, an
analysis of price expectations yields similar results providing evidence in favour of state-dependent sticky plan
models. Third, intermediate input cost changes are among the most important determinants of price adjustment
suggesting that pricing models should explicitly incorporate price setting at different production stages. However, the results show that adjustment to input cost changes takes time indicating "additional stickiness" at the last stage of processing
Household Inflation Expectations: Information Gathering, Inattentive or âStubbornâ?
Decomposing the misery index: A dynamic approach
YesThe misery index (the unweighted sum of unemployment and inflation
rates) was probably the first attempt to develop a single statistic to measure the level
of a populationâs economic malaise. In this letter, we develop a dynamic approach to
decompose the misery index using two basic relations of modern macroeconomics:
the expectations-augmented Phillips curve and Okunâs law. Our reformulation of the
misery index is closer in spirit to Okunâs idea. However, we are able to offer an improved
version of the index, mainly based on output and unemployment. Specifically,
this new Okunâs index measures the level of economic discomfort as a function of
three key factors: (1) the misery index in the previous period; (2) the output gap in
growth rate terms; and (3) cyclical unemployment. This dynamic approach differs
substantially from the standard one utilised to develop the misery index, and allow
us to obtain an index with five main interesting features: (1) it focuses on output,
unemployment and inflation; (2) it considers only objective variables; (3) it allows
a distinction
between short-run and long-run phenomena; (4) it places more
importance
on output and unemployment rather than inflation; and (5) it weights
recessions
more than expansions
A Model of Vertical Oligopolistic Competition
This paper develops a model of successive oligopolies with endogenous market entry, allowing for varying degrees of product differentiation and entry costs in both markets. Our analysis shows that the downstream conditions dominate the overall profitability of the two-tier structure while
the upstream conditions mainly affect the distribution of profits. We compare the welfare effects of upstream versus downstream deregulation policies and show that the impact of deregulation may be overvalued when ignoring feedback effects from the other market. Furthermore, we analyze how different forms of vertical restraints influence the endogenous market structure and show when they are welfare enhancing
Universal features in the growth dynamics of complex organizations
We analyze the fluctuations in the gross domestic product (GDP) of 152
countries for the period 1950--1992. We find that (i) the distribution of
annual growth rates for countries of a given GDP decays with ``fatter'' tails
than for a Gaussian, and (ii) the width of the distribution scales as a power
law of GDP with a scaling exponent . Both findings are in
surprising agreement with results on firm growth. These results are consistent
with the hypothesis that the evolution of organizations with complex structure
is governed by similar growth mechanisms.Comment: 4 pages, 7 ps figures, using Latex2e with epsf rotate and multicol
style files. Submitted to PR
Whither Capitalism? Financial externalities and crisis
As with global warming, so with financial crises â externalities have a lot to answer for. We
look at three of them. First the financial accelerator due to âfire salesâ of collateral assets -- a
form of pecuniary externality that leads to liquidity being undervalued. Second the ârisk-
shiftingâ behaviour of highly-levered financial institutions who keep the upside of risky
investment while passing the downside to others thanks to limited liability. Finally, the
network externality where the structure of the financial industry helps propagate shocks
around the system unless this is checked by some form of circuit breaker, or âring-fenceâ.
The contrast between crisis-induced Great Recession and its aftermath of slow growth in the
West and the rapid - and (so far) sustained - growth in the East suggests that successful
economic progress may depend on how well these externalities are managed
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