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Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Asymmetric adjustments of price and output
Peter A. Tinsley
Reva Krieger
Abstract

Asymmetries in price adjustment can reconcile contrasts between rapid price movements in inflationary episodes, consistent with classical theories of flexible pricing, and sluggish price responses in contractions, consistent with Keynesian theories of sticky price adjustments. Nonparametric analysis of SIC two-digit industry data indicates that negative asymmetries are more pronounced for real outputs than for nominal outputs, suggesting reversed positive asymmetries in producer pricing. Pricing decision rules are estimated to distinguish between asymmetries in conditioning shocks and asymmetries in producer responses. Two rational motives for asymmetric pricing are supported.


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Peter A. Tinsley & Reva Krieger, Asymmetric adjustments of price and output, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 1997-31, 1997.
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Keywords: Input-output analysis
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