English, Article, Journal or magazine article edition: Inflationary Expectations and Price Setting Behavior Ray C. Fair

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Bookmark: http://trove.nla.gov.au/version/141849
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Inflationary Expectations and Price Setting Behavior
Author
  • Ray C. Fair
Physical Description
  • preprint
Notes
  • This paper tests for the existence of expectational effects in very disaggregate price equations. Price equations are estimated using monthly data for each of 40 products. The dynamic specification of the equations is also tested, including whether the equations should be specified in level form or in change form. Two expectational hypotheses are used, one in which expectations of the aggregate price level are a function of the past values of the price level and one in which expectations are rational. Under the first hypothesis the lag length is estimated along with the other parameters, and under the second hypothesis the lead length is estimated along with the other parameters. The results strongly support the hypothesis that aggregate price expectations affect individual pricing decisions. The results do not discriminate very well between the level and change forms of the price equation, although there is a slight edge for the level form. The lag and lead lengths are not estimated precisely, but in most cases the lag length is less than 30 months and the lead length is less than 5 months.
  • RePEc:nbr:nberwo:3102
  • Inflation, expectations, price equations, price level
  • RePEc:cwl:cwldpp:923
Language
  • English
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