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Staggered Contracts and the Frequency of Price Adjustment

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  • Stephen G. Cecchetti

Abstract

This paper describes a methodology for measuring the frequency of price change in order to test the relevance of assuming prices to be set for discrete periods of time at overlapping intervals. Taylor [1980] has related the frequency of adjustment to the rigidity of the economy in responding to unanticipated events. Estimates of the frequency of price change are computed from data on the component parts of the deflator for personal consumption expenditure. The results show a substantial decrease in the period between price changes during the middle 1960s, and marked fluctuations in the 1970s. The movements suggest changes in the rigidity associated with both changes in general price inflation and changes in the posture of the fiscal and monetary authorities.

Suggested Citation

  • Stephen G. Cecchetti, 1985. "Staggered Contracts and the Frequency of Price Adjustment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 935-959.
    • Handle: RePEc:oup:qjecon:v:100:y:1985:i:supplement:p:935-959.
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    File URL: http://hdl.handle.net/10.1093/qje/100.Supplement.935
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    Cited by:

    1. International Monetary Fund, 2008. "Mauritius: Selected Issues," IMF Staff Country Reports 2008/237, International Monetary Fund.
    2. Anil K Kashyap, 2013. "Comment," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 293-307.
    3. Peter J. Klenow & Oleksiy Kryvtsov, 2008. "State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(3), pages 863-904.
    4. John C. Driscoll & Ruth A. Judson, 2013. "Sticky deposit rates," Finance and Economics Discussion Series 2013-80, Board of Governors of the Federal Reserve System (U.S.).
    5. Duersch, Peter & Eife, Thomas A., 2019. "Price competition in an inflationary environment," Journal of Monetary Economics, Elsevier, vol. 104(C), pages 48-66.
    6. Slade, Margaret E., 1999. "Sticky prices in a dynamic oligopoly: An investigation of (s,S) thresholds," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 477-511, May.
    7. Erwan Gautier, 2009. "Les ajustements microéconomiques des prix : une synthèse des modèles théoriques et résultats empiriques," Revue d'économie politique, Dalloz, vol. 119(3), pages 323-372.
    8. Alexander L. Wolman, 2007. "The frequency and costs of individual price adjustment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(6), pages 531-552.
    9. Aucremanne, Luc & Dhyne, Emmanuel, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 331, European Central Bank.
    10. J.M.C. Santos Silva & Carlos Robalo Marques & Daniel Dias, 2007. "A note on measuring the importance of the uniform nonsynchronization hypothesis," Economics Bulletin, AccessEcon, vol. 4(6), pages 1-8.
    11. Robalo Marques, Carlos & Dias, Daniel & Santos Silva, João M. C., 2006. "Measuring the importance of the uniform nonsynchronization hypothesis," Working Paper Series 606, European Central Bank.
    12. Cole, Harold L. & Ohanian, Lee E., 2002. "Shrinking money: the demand for money and the nonneutrality of money," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 653-686, May.
    13. Anil K Kashyap, 2012. "Comment on "Individual Price Adjustment along the Extensive Margin"," NBER Chapters, in: NBER Macroeconomics Annual 2012, Volume 27, pages 293-307, National Bureau of Economic Research, Inc.
    14. Benjamin Eden, 1994. "Time Rigidities In The Adjustment Of Prices To Monetary Shocks: An Analysis Of Micro Data," Bank of Israel Working Papers 1994.16, Bank of Israel.
    15. Paul Mizen & Boris Hofmann, 2002. "Base rate pass-through: evidence from banks' and building societies' retail rates," Bank of England working papers 170, Bank of England.
    16. Abdul Karim, Zulkefly & Zaidi, Mohd Azlan Shah & Jusoh, Mansor, 2008. "Variabiliti harga relatif dan inflasi : bukti empirikal di Semenanjung Malaysia, Sabah dan Sarawak [Relative price variability and inflation: empirical evidence in Peninsular Malaysia, Sabah and Sa," MPRA Paper 26970, University Library of Munich, Germany, revised Jun 2008.
    17. Kurri, Samu, 2007. "Price changes in Finland: some evidence from micro CPI data," Working Paper Series 728, European Central Bank.
    18. John H. Rogers & Hayden P. Smith, 2001. "Border effects within the NAFTA countries," International Finance Discussion Papers 698, Board of Governors of the Federal Reserve System (U.S.).
    19. Harold L. Cole & Lee E. Ohanian, 1998. "The demand for money and the nonneutrality of money," Staff Report 246, Federal Reserve Bank of Minneapolis.
    20. repec:ebl:ecbull:v:4:y:2007:i:6:p:1-8 is not listed on IDEAS

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