NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Benjamin Born

Frankfurt School of Finance & Management
Adickesallee 32-34
60322 Frankfurt
Germany

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Institutional Affiliation: Frankfurt School of Finance and Management

NBER Working Papers and Publications

June 2013Time-Varying Business Volatility and the Price Setting of Firms
with Ruediger Bachmann, Steffen Elstner, Christian Grimme: w19180
Does time-varying business uncertainty/volatility affect the price setting of firms and, if so, in what way? To address this question, we estimate from the firm-level micro data of the German ifo Business Climate Survey the impact of idiosyncratic volatility on the extensive margin of the price setting behavior of firms. We find that heightened business uncertainty increases the probability of a price change, which suggests that, for price setting, the volatility effect dominates the “wait-and-see” effect of uncertainty. In a second step, we use structural VAR models to estimate the effects of time-varying business uncertainty on the intensive pricing margin. We find that higher business uncertainty leads to both an increase in price dispersion and in the average size of absolute price cha...

Published: Rüdiger Bachmann & Benjamin Born & Steffen Elstner & Christian Grimme, 2018. "Time-Varying Business Volatility and the Price Setting of Firms," Journal of Monetary Economics, . citation courtesy of

 
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