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Price adjustment in open economies

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  • Torben Andersen
  • Niels Hansen

Abstract

The adjustment of product prices in open economies is analyzed by use of a model encompassing different product market structures and quarterly data for Denmark, Germany, the Netherlands, Norway, and Sweden. In general, support is found in favor of a specialized production model implying that prices are affected by internal and external factors. Price adjustment displays substantial inertia and is in the short run driven by real shocks to both supply and demand, as well as being characterized by nominal rigidities, whereas in the long run relative prices are driven solely by supply variables. Copyright Kluwer Academic Publishers 1995

Suggested Citation

  • Torben Andersen & Niels Hansen, 1995. "Price adjustment in open economies," Open Economies Review, Springer, vol. 6(4), pages 303-321, October.
    • Handle: RePEc:kap:openec:v:6:y:1995:i:4:p:303-321
    DOI: 10.1007/BF01000385
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    References listed on IDEAS

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    1. Alogoskoufis, George & Martin, Christopher & Pittis, Nikitas, 1990. "Pricing and Product Market Structure in Open Economies: An Empirical Test," CEPR Discussion Papers 486, C.E.P.R. Discussion Papers.
    2. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    3. Bruce, Neil & Purvis, Douglas D., 1985. "The specification and influence of goods and factor markets in open-economy macroeconomic models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 16, pages 807-857, Elsevier.
    4. Silvestre, Joaquim, 1993. "The Market-Power Foundations of Macroeconomic Policy," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 105-141, March.
    5. repec:bla:econom:v:59:y:1992:i:236:p:403-19 is not listed on IDEAS
    6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    7. Dixon, Huw David & Rankin, Neil, 1994. "Imperfect Competition and Macroeconomics: A Survey," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 171-199, April.
    8. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Paper 1227, Economics Department, Queen's University.
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    Cited by:

    1. Smith, Peter N., 2000. "Output price determination and the business cycle," Economic Modelling, Elsevier, vol. 17(1), pages 49-69, January.

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