A State-Dependent Model of Intermediate Goods Pricing
37 Pages Posted: 1 Feb 2010
There are 2 versions of this paper
A State-Dependent Model of Intermediate Goods Pricing
A State-Dependent Model of Intermediate Goods Pricing
Date Written: December 1, 2009
Abstract
Recent analyses of transaction-level datasets have generated new stylized facts on price setting and greatly influenced the empirical macroeconomics literature. This work has uncovered marked heterogeneity in price stickiness, demonstrated that even non-zero price changes do not fully "pass through" cost shocks, and offered evidence of synchronization in the timing of price changes. Further, intrafirm prices have been shown to differ from arm's length prices in each of these characteristics. This paper develops a state-dependent model of intermediate goods pricing, which allows for arm's length and intrafirm transactions, and is capable of generating these empirical pricing patterns.
Keywords: State-Dependent, nominal rigidities, strategic complementarity, intrafirm trade
JEL Classification: E3, F4
Suggested Citation: Suggested Citation
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