Adapting prices or quantities in the presence of adjustment costs?

Torben M. ANDERSEN, Eric Toulemonde

Résultats de recherche: Contribution à un journal/une revueArticle

Résumé

It is often hypothesized that costs of adjusting both price and quantities may have important implications for the macroeconomic adjustment process, not least to nominal shocks. We analyse this in an explicit intertemporal general equilibrium model considering the empirically relevant case of fixed costs of adjusting prices and fixed and variable costs of adjusting quantities. We find that the presence of both price and quantity adjustment costs changes the response to shocks significantly. It is an implication that "small" shocks do not support the "menu-cost case" but rather both fixed prices and quantities (rationing). A numerical analysis based on available evidence on adjustment costs is used to illustrate the likelihood that the various adjustment patterns actually arise.
langue originaleAnglais
Pages (de - à)177-196
Nombre de pages20
journalJournal of Money Credit and Banking
Volume36
étatPublié - 1 avr. 2004

Empreinte digitale

Adjustment costs
Fixed costs
General equilibrium model
Numerical analysis
Variable cost
Adjustment process
Menu costs
Rationing
Fixed price
Costs
Macroeconomics

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Adapting prices or quantities in the presence of adjustment costs? / ANDERSEN, Torben M.; Toulemonde, Eric.

Dans: Journal of Money Credit and Banking , Vol 36, 01.04.2004, p. 177-196.

Résultats de recherche: Contribution à un journal/une revueArticle

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N2 - It is often hypothesized that costs of adjusting both price and quantities may have important implications for the macroeconomic adjustment process, not least to nominal shocks. We analyse this in an explicit intertemporal general equilibrium model considering the empirically relevant case of fixed costs of adjusting prices and fixed and variable costs of adjusting quantities. We find that the presence of both price and quantity adjustment costs changes the response to shocks significantly. It is an implication that "small" shocks do not support the "menu-cost case" but rather both fixed prices and quantities (rationing). A numerical analysis based on available evidence on adjustment costs is used to illustrate the likelihood that the various adjustment patterns actually arise.

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