A State-Dependent Model of Intermediate Goods Pricing

Brent Neiman

NBER Working Paper No. 16283
Issued in August 2010
NBER Program(s):International Finance and Macroeconomics Program, International Trade and Investment Program, Monetary Economics Program

Recent analyses of transaction-level datasets have generated new stylized facts on price setting and greatly influenced the empirical open- and closed-economy macroeconomics literatures. This work has uncovered marked heterogeneity in price stickiness, demonstrated that even non-zero price changes do not fully "pass through" exchange rate shocks, and offered evidence of synchronization in the timing of price changes. Further, intrafirm prices have been shown to differ from arm's length prices in each of these characteristics. This paper develops a state-dependent model of intermediate goods pricing, which allows for arm's length and intrafirm transactions, and is capable of generating these empirical pricing patterns.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w16283

Published: Brent, Neiman, 2011. "A state-dependent model of intermediate goods pricing," Journal of International Economics, Elsevier, vol. 85(1), pages 1-13, September. citation courtesy of

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