NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Dynamics of the U.S. Price Distribution

David Berger, Joseph Vavra

NBER Working Paper No. 21732
Issued in November 2015
NBER Program(s):   EFG   IO   ME

We use microdata underlying U.S. consumer, producer and import price indices to document how the distribution of price changes evolves over time. Two striking features characterize pricing at each stage of production: 1) Frequency is countercyclical. 2) Frequency is correlated with variance. Conversely, other statistics which have received recent attention, like kurtosis, do not exhibit uniform patterns across our datasets. What implications do our empirical results have for monetary policy? Using a flexible accounting framework which collapses the high-dimensional distribution of price changes into a single measure of aggregate price flexibility, we show that flexibility is highly variable and countercyclical.

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Document Object Identifier (DOI): 10.3386/w21732

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