Measuring the Importance of the Uniform Nonsynchronization Hypothesis

In this paper we critically reappraise some measures of the importance of time-dependent price setting rules and propose an alternative way to gauge the significance of this type of price setting behaviour. The merits of the proposed measure are highlighted in an application using micro-data. Our results suggest that a large proportion of price trajectories may be compatible with simple time-dependent price setting mechanisms but the strength of this evidence very much depends on the way that is used to evaluate the importance of this type of behaviour.

A note on measuring the importance of the uniform nonsynchronization hypothesis

In this note we reappraise the measure of the importance of time-dependent price setting rules suggested by Klenow and Kryvtsov (2005, "State-Dependent or Time-Dependent Pricing: Does It Matter for Recent U.S. Inflation?," Bank of Canada Working Paper 05-4). Furthermore, we propose an alternative way to gauge the significance of this type of price setting behavior, which can be interpreted as an upper bound for the proportion of price trajectories which are compatible with the uniform nonsynchronization hypothesis. The merits of the proposed measure are highlighted in an application using micro-data. Our results suggest that a large proportion of price trajectories may be compatible with simple time-dependent price setting mechanisms, but the strength of this evidence very much depends on the way that is used to evaluate the importance of this type of behavior.perfect synchronization.

Measuring the importance of the uniform nonsynchronization hypothesis

In this paper we critically reappraise some measures of the importance of time-dependent price setting rules and propose an alternative way to gauge the significance of this type of price setting behaviour. The merits of the proposed measure are highlighted in an application using micro-data. Our results suggest that a large proportion of price trajectories may be compatible with simple time-dependent price setting mechanisms but the strength of this evidence very much depends on the way that is used to evaluate the importance of this type of behaviour. JEL Classification: D40, E31, L11perfect synchronization, Time-dependent price setting models, uniform staggering

On the Fisher-Konieczny Index of Price Changes Synchronization

This note provides a structural interpretation for the index of price changes synchronization proposed by Fisher and Konieczny (2000, Economics Letters, 68, 271-277) and shows that it can be used to test the hypothesis of uniform staggering.

Why Should Central Banks Avoid the Use of the Underlying Inflation Indicator?

This paper assesses the usefulness of the commonly used underlying inflation indicator, in light of the criteria proposed in Marques et al. (2000). Empirical evidence for a group of six countries strongly suggets that the use of underlying inflation as an indicator of trend inflation should be avoided.

Time or state dependent price setting rules? Evidence from Portuguese micro data

In this paper we analyse the ability of time and state dependent price setting rules to explain durations of price spells or the probability of changing prices. Our results suggest that simple time dependent models cannot be seen as providing a reasonable approximation to the data and that state dependent models are required to fully characterise the price setting behaviour of Portuguese firms. Inflation, the level of economic activity and the magnitude of the last price change emerge as relevant variables affecting the probability of changing prices. Moreover, it is seen that the impact differs for negative and positive values of these covariates. JEL Classification: C41, D40, E31CPI data, Hazard functions, inflation

Standards culturales portugueses – el punto de vista español

El objetivo de esta comunicación es de presentar resultados preliminares de un estudio que procura identificar las características principales de la cultura portuguesa más relevantes desde un punto de vista español. Para tanto es usado el método de los “standards culturales”. Con base en entrevistas a dieciséis profesionales españoles con experiencia de trabajo en Portugal han sido identificados cuatro standards culturales portugueses: 1- Importancia de títulos y jerarquías. Los españoles consideran a los portugueses como un pueblo que sobre valoriza los títulos académicos, con una noción de jerarquía muy marcada e con un grande distanciamiento al poder, mucho a causa de una predominante estructura jerárquica vertical; 2- Miedo e Ambigüedad. Los portugueses son considerados personas con miedo del incierto y de la novedad, y poco dispuestos al riesgo y muy presos al saber enraizado. Son también maestros en el arte de asumir posiciones ambiguas porque son poco corajosos en la asunción de responsabilidades por sus actos. Adicionalmente se nota que se rigen por intrincadas tejas burocráticas; 3- Poca importancia de Agendas y Relojes. Los portugueses tienen grande dificultad en cumplir plazos e horarios, y definir agendas realizables; 4- Espíritu de Grupo. Los españoles reconocen los portugueses como personas que luchan mejor por el suceso del grupo de que hacen parte e que son más aplicados en sus tareas. Como limitación más importante de los resultados obtenidos se puede apuntar la poca diferenciación de los elementos de la muestra respecto al origen regional en España.The objective of this communication is to present some preliminary results of a study which tries to identify the main characteristics of the Portuguese culture which are relevant from a Spanish perspective. A new qualitative methodology is used – the cultural standards method. Drawing on interviews of sixteen Spanish nationals working in Portugal, four Portuguese cultural standards could be identified: 1. Importance of titles and hierarchies. Spaniards think of the Portuguese as a culture which overemphasizes academic titles and with a strict and marked notion of hierarchy. 2. Fear and ambiguity. The Portuguese are considered as persons with fear of the unknown and of new things, risk avoiding and too tied to traditional knowledge. They are masters in adopting an ambiguous stance, as they are less courageous in taking responsibility for their deeds. Additionally they are bound by a complex bureaucratic web. 3. Less emphasis regarding agendas and clocks. Portuguese have considerable difficulty in observing deadlines and timetables, as well as in scheduling feasible agendas. 4. “Esprit de corps”. Portuguese are held as persons who fight harder for the success of the group to which they belong and who are more concentrated on their tasks. The main limitation of this preliminary study has to do with the fact that there is little variation within the sample regarding the regional origin of the Spanish persons interviewed and this may influence the results obtained so far

Why are some prices stickier than others? Firm-data evidence on price adjustment lags

Infrequent price changes at the firm level are now well documented in the literature. However, a number of issues remain partly unaddressed. This paper contributes to the literature on price stickiness by investigating the lags of price adjustments to different types of shocks. We find that adjustment lags to cost and demand shocks vary with firm characteristics, namely the firm’s cost structure, the type of pricing policy, and the type of good. We also document that firms react asymmetrically to demand and cost shocks, as well as to positive and negative shocks, and that the degree and direction of the asymmetry varies across firms. JEL Classification: C41, D40, E31Firm heterogeneity, Panel-ordered probit, real rigidities, survey data

Using the First Principal Component as a Core Inflation Indicator

This paper investigates the consequences of non-stationarity for the principal components analysis and suggests a data transformation that allows obtaining smoother series for the first principal component to be used as a core inflation indicator. The paper also introduces a theoretical model, which allows interpreting core inflation as a common stochastic trend to the year-on-year rates of change of the price indices of the basic CPI items. Finally, it is shown that the first principal component computed in real time meets the evaluation criteria introduced in Marques et al. (2000).