The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications / Olivier Coibion, Yuriy Gorodnichenko, Gee Hee Hong.

Format:

Book

Author/Creator:

Coibion, Olivier.

Contributor:

Gorodnichenko, Yuriy.

Hong, Gee Hee.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18273.

NBER working paper series no. w18273

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Cyclicality of Sales, Regular and Effective Prices

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

We study the cyclical properties of sales, regular price changes and average prices paid by consumers ("effective" prices) in a dataset containing prices and quantities sold for numerous retailers across a variety of U.S. metropolitan areas. Both the frequency and size of sales fall when local unemployment rates rise and yet the inflation rate for effective prices paid by consumers declines significantly with higher unemployment. This discrepancy can be reconciled by consumers reallocating their expenditures across retailers, a feature of the data which we document and quantify. We propose a simple model with household shopping effort and store-switching consistent with these stylized facts and document its implications for business cycles and policymakers.

Notes:

Print version record

August 2012.