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International Menu Costs and Price Dynamics
Author(s) -
Schoenle Raphael
Publication year - 2017
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12275
Subject(s) - economics , revenue , microeconomics , monetary economics , econometrics , finance
The pricing behavior of firms systematically differs across domestic and export markets. First, domestic producer prices change approximately twice as often, the probability of synchronized price adjustment across markets is 21% for upwards adjustments and 14% for downwards adjustments, the size of export price changes is substantially larger and there are strong seasonality effects. Second, economic fundamentals can only partially explain adjustment decisions and cross‐market synchronization. Third, I attribute the remaining unexplained part in adjustment decisions to differences in menu costs across countries. Model‐implied export menu costs are 1.5% of steady state revenues and three times domestic market menu costs.