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American Economic Journal: Macroeconomics: Vol. 6 No. 2 (April 2014)

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How Frequent Are Small Price Changes?

Article Citation

Eichenbaum, Martin, Nir Jaimovich, Sergio Rebelo, and Josephine Smith. 2014. "How Frequent Are Small Price Changes?" American Economic Journal: Macroeconomics, 6(2): 137-55.

DOI: 10.1257/mac.6.2.137

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.

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Authors

Eichenbaum, Martin (Northwestern U)
Jaimovich, Nir (Duke U)
Rebelo, Sergio (Northwestern U)
Smith, Josephine (NYU)

JEL Classifications

C82: Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
E31: Price Level; Inflation; Deflation
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L81: Retail and Wholesale Trade; e-Commerce

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