The Cyclicality of Sales, Regular, and Effective Prices: Business Cycle and Policy Implications: Comment
- (pp. 3229-42)
Abstract
Coibion, Gorodnichenko, and Hong (2015) argue that the CPI underestimates the deceleration in consumer prices during economic downturns because the index fails to account for the reallocation of consumer spending from high-price to low-price stores. We show that their conclusion hinges on some nonstandard methodological choices, including an aggressive censoring of price adjustments and a treatment for missing observations that can leave out some of the price variation. Under our preferred methodology, the regression results no longer indicate that greater store switching during downturns is a statistically or economically significant phenomenon.Citation
Gagnon, Etienne, David López-Salido, and Jason Sockin. 2017. "The Cyclicality of Sales, Regular, and Effective Prices: Business Cycle and Policy Implications: Comment." American Economic Review, 107 (10): 3229-42. DOI: 10.1257/aer.20150891Additional 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
- M31 Marketing