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Asymmetric Adjustments of Price and Output

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  • Tinsley, P A
  • Krieger, Reva

Abstract

Classical theories predict rapid price adjustments, which are observed in inflationary episodes; Keynesian theories of sticky prices predict sluggish price responses, which are observed in contractions. The authors attempt to reconcile these observations in a model with asymmetries in producer price and output adjustments. Analysis of SIC two-digit industry data indicates production frequently exhibits negative asymmetry--shortfalls from trend are larger than positive deviations--whereas price often displays positive asymmetry. Evidence supporting two rational motives for asymmetric pricing is presented, but causal interactions between output and price asymmetries are not resolved. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Tinsley, P A & Krieger, Reva, 1997. "Asymmetric Adjustments of Price and Output," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 631-652, July.
    • Handle: RePEc:oup:ecinqu:v:35:y:1997:i:3:p:631-52
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    2. Deleersnyder, B. & Dekimpe, M.G. & Sarvary, M. & Parker, P.M., 2003. "Weathering Tight Economic Times: The Sales Evolution Of Consumer Durables Over The Business Cycle," ERIM Report Series Research in Management ERS-2003-046-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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