Time Rigidities In The Adjustment of Prices to Monetary Shocks: An Analysis of Micro Data

01/11/1994 |  Eden Beni

Abstract

A store that increases the nominal price of a given good by more than other stores will tend to wait longer before

it increases its nominal price again, but only by as much as 15% of the additional time interval predicted by models

which assume fixed menu-type costs for changing nominal prices. This finding is based on large data sets of prices

by products and stores during recent inflationary periods in Israel. It suggests that coordination-type costs are

important relative to menu-type costs.




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