Dynamics of the U.S. Price Distribution
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.
We are grateful to Nick Bloom, Eduardo Engel, Nir Jaimovich, Giuseppe Moscarini and Emi Nakamura for helpful comments and Rozi Ulics and Randal Verbrugge for support at the BLS. Finally, we thank Chiara Maggi and Yuta Takahashi for being wonderful RAs. All remaining errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
David Berger & Joseph Vavra, 2018. "Dynamics of the U.S. price distribution," European Economic Review, vol 103, pages 60-82. citation courtesy of