Sticky Prices, Competition and the Phillips Curve

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. find that the latter effect clearly dominates and plays an important role in explaining price stickiness. The effect of a marginal increase in economic activity on the likelihood of a price increase is between 63% and 85% lower for products, that face very strong competition, compared to products, that face very weak competition. In line with the theory, prices of products, that face very strong competition, are also less likely to decrease in response to marginal decreases in economic activity. Moreover, it heavily depends on the degree of competition that a product faces whether, and to what extent, the micro Phillips curve is non-linear. The stronger the competition the weaker will be the non-linearity of the micro Phillips curve. My findings imply that effective business cycle policy necessitates good competition policy. Reforms which strengthen the competition in an economy will make stimulus or stabilization policy more effective. Furthermore, the results imply that stimulus or stabilization measures, that target specifically high competition firms or sectors, may be more effective than programs, that follow an indiscriminate all-round principle. Terms of use: Documents inJEL codes: E31, E32

Variation in the Phillips Curve Relation Across Three Phases of the Business Cycle

“…A.5 Relationship between moderately-persistent gap and transient gap MEDIUM_PERSIST TRANSIENT 1985198719891991199320052009…”

Exchange Rate Transmission and Export Activity at the Firm Level

“…7 The same survey was analyzed by Lein and Köberl (2009);Lein (2010);and Mikosch (2011). Note that the set-up of this table and of Tables 2, 3 and A.1 is adopted from Lein (2010).…”