What We Can Learn About the Behaviour of Firms from the Average Monthly Frequency of Price‐Changes: An Application to the UK CPI Data

@article{Dixon2013WhatWC,
  title={What We Can Learn About the Behaviour of Firms from the Average Monthly Frequency of Price‐Changes: An Application to the UK CPI Data},
  author={Huw Dixon and Kun Tian},
  journal={ERN: Other Econometrics: Mathematical Methods \& Programming (Topic)},
  year={2013}
}
  • Huw Dixon, Kun Tian
  • Published 30 April 2013
  • Economics, Mathematics
  • ERN: Other Econometrics: Mathematical Methods & Programming (Topic)
The monthly frequency of price-changes is a prominent feature of many studies of the CPI micro-data. In this paper, we see what the frequency implies for the behaviour of price-setters in terms of the cross-sectional distribution average of price-spell durations across firms. We derive a lower bound for the mean duration of price-spells averaged across firms. We use the UK CPI data at the aggregate and sectoral level and find that the actual mean is about twice the theoretical minimum… 
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