The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications
American Economic Review
vol. 105,
no. 3, March 2015
(pp. 993-1029)
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)Citation
Coibion, Olivier, Yuriy Gorodnichenko, and Gee Hee Hong. 2015. "The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications." American Economic Review, 105 (3): 993-1029. DOI: 10.1257/aer.20121546Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- L25 Firm Performance: Size, Diversification, and Scope
- L81 Retail and Wholesale Trade; e-Commerce