DP15383 Measuring Price Selection in Microdata - It's Not There
|Author(s):||Peter Karadi, Raphael Schoenle, Jesse Wursten|
|Publication Date:||October 2020|
|Keyword(s):||identified credit and monetary policy shocks, monetary non-neutrality, PPI microdata, price-gap proxy, scanner data, State-dependent pricing|
|JEL(s):||E31, E32, E52|
|Programme Areas:||Monetary Economics and Fluctuations|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=15383|
We use microdata to estimate the strength of price selection - a key metric for the effect of monetary policy on the real economy. We find that price adjustment pressure at the product level does not significantly influence the probability of price adjustment in response to identified monetary and credit shocks, suggesting price selection is absent. This happens even though prices do respond significantly both to aggregate shocks and product-level adjustment pressure directly. Our results are broadly consistent with second-generation state-dependent pricing models and sizable effects of monetary policy on the real economy.