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The Cross-Sectional Distribution of Price Stickiness Implied by Aggregate Data

Author

Listed:
  • Carlos Carvalho

    (PUC-Rio)

  • Niels Arne Dam

    (Finance Denmark)

  • Jae Won Lee

    (University of Virginia)

Abstract

We provide evidence on three mechanisms that can reconcile frequent individual price changes with sluggish aggregate price dynamics. To that end, we estimate a semistructural model that can extract information about real rigidities and the distribution of price stickiness from aggregate data. Hence, the model can also speak to the debate about the aggregate implications of sales. Our estimates indicate large real rigidities and substantial heterogeneity in price stickiness. Moreover, the cross-sectional distribution of price stickiness implied by aggregate data is in line with an empirical distribution obtained from microprice data that factors out sales and product substitutions.

Suggested Citation

  • Carlos Carvalho & Niels Arne Dam & Jae Won Lee, 2020. "The Cross-Sectional Distribution of Price Stickiness Implied by Aggregate Data," The Review of Economics and Statistics, MIT Press, vol. 102(1), pages 162-179, March.
    • Handle: RePEc:tpr:restat:v:102:y:2020:i:1:p:162-179
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    References listed on IDEAS

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    5. Jae Won Lee & Seunghyeon Lee, 2025. "Monetary Non-Neutrality in a Multisector Economy: The Role of Risk-Sharing," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 55, January.

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