Identifying Price Reviews by Firms: An Econometric Approach | Zendy

HARRIS MARK N. | Zendy; LE BIHAN HERVÉ | Zendy; SEVESTRE PATRICK | Zendy

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Identifying Price Reviews by Firms: An Econometric Approach

Author(s) -

HARRIS MARK N.,

LE BIHAN HERVÉ,

SEVESTRE PATRICK

Publication year - 2019

Publication title -

journal of money, credit and banking

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 1.763

H-Index - 108

eISSN - 1538-4616

pISSN - 0022-2879

DOI - 10.1111/jmcb.12675

Subject(s) - economics , probit model , price setting , point (geometry) , probit , econometrics , relevance (law) , price level , factor price , ordered probit , mid price , monetary economics , microeconomics , geometry , mathematics , political science , law

Price reviews are a potentially costly activity. A significant fraction of unchanged prices may stem from firms not reviewing prices, rather than from obstacles to changing prices per se , such as menu costs. In this paper, we disentangle these two causes of price stickiness by estimating an inflated ordered probit model on a panel of French manufacturing firms. The results point to a low frequency of price reviews, suggestive of the relevance of information costs as a determinant of the observed price stickiness. In view of the “inattentive producers” literature, pointing that the source of price rigidity matters, this is suggestive of a large real effect of monetary policy.

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