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Downward Price Rigidity of the Japanese CPI -- Analysis by Probability Density Functions and Spatial Density Functions

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  • Munehisa Kasuya

    (Bank of Japan)

Abstract

We define downward price rigidity as the state in which the speed at which prices fall is slower than that in which they rise. Based on this definition, we examine the downward price rigidity of each item that constitutes the core CPI of Japan. That is, according to the results of fractional integration tests on price changes of individual items, we estimate probability density functions in the stationary case and estimate spatial density functions in the nonstationary case. We also test their skewness. As a result, we found significant downward price rigidity in some items. Roughly speaking, about 20-30% of the core CPI weight shows downward price rigidity.

Suggested Citation

  • Munehisa Kasuya, 1999. "Downward Price Rigidity of the Japanese CPI -- Analysis by Probability Density Functions and Spatial Density Functions," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    • Handle: RePEc:boj:bojwps:99-e-3r
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    File URL: http://www.boj.or.jp/en/research/wps_rev/wps_1999/data/cwp99e03.pdf
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    References listed on IDEAS

    as
    1. Balvers, Ronald J, 1988. "Monopoly Power and Downward Price Rigidity under Costly Price Adjustment," Bulletin of Economic Research, Wiley Blackwell, vol. 40(2), pages 115-131, April.
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    3. Peter C. B. Phillips, 2001. "Descriptive econometrics for non-stationary time series with empirical illustrations," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 389-413.
    4. Laurence Ball & N. Gregory Mankiw, 1995. "Relative-Price Changes as Aggregate Supply Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 161-193.
    5. Robert J. Gordon, 1975. "Alternative Responses of Policy to External Supply Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1), pages 183-206.
    6. David Neumark & Steven A. Sharpe, 1992. "Market Structure and the Nature of Price Rigidity: Evidence from the Market for Consumer Deposits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 657-680.
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    Cited by:

    1. Ito, Hiro, 2003. "Was Japan’s Real Interest Rate Really Too High During the 1990s? The Role of the Zero Interest Rate Bound and Other Factors," Santa Cruz Department of Economics, Working Paper Series qt48k5q6vd, Department of Economics, UC Santa Cruz.
    2. Hideo Hayakawa & Hiroshi Ugai, 2001. "Why did prices in Japan hardly decline during the 1997-98 recession?," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 139-173, Bank for International Settlements.
    3. Latsos Sophia, 2018. "Real Wage Effects of Japan’s Monetary Policy," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 69(1), pages 177-215, July.

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    More about this item

    Keywords

    CPI; Spatial Density Function; Price rigidity; Fractional integration;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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