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Discussion Paper
How Do Firms Adjust Prices in a High Inflation Environment?
How do firms set prices? What factors do they consider, and to what extent are cost increases passed through to prices? While these are important questions in general, they become even more salient during periods of high inflation. In this blog post, we highlight preliminary results from ongoing research on firms’ price-setting behavior, a joint project between researchers at the Federal Reserve Banks of Atlanta, Cleveland, and New York. We use a combination of open-ended interviews and a quantitative survey in our analysis. Firms reported that the strength of demand was the most important ...
Discussion Paper
Firm Price-Setting Behavior Amid Elevated Price Growth: Evidence From Our Surveys
very month, the Richmond Fed surveys firms across the Fifth District to understand how economic and business conditions are changing. As a part of this survey, we ask firms to report the 12-month percentage change in the prices they receive from customers for their goods or services. Additionally, we ask firms to provide their expectations for how prices will change over the next 12 months.As inflation has picked up in the U.S. economy, we have paid particular attention to the price measures from our surveys. Not surprisingly, firms in our district have experienced higher price growth since ...
Working Paper
The Real Effects of Monetary Shocks: Evidence from Micro Pricing Moments
This paper evaluates the informativeness of eight micro pricing moments for monetary non-neutrality. Frequency of price changes is the only robustly informative moment. The ratio of kurtosis over frequency is significant only because of frequency, and insignificant when non-pricing moments are included. Non-pricing moments are additionally informative about monetary non-neutrality, indicating potential omitted variable bias and the inability of pricing moments to serve as sufficient statistics. In contrast to existing theoretical work, this ratio has an ambiguous relationship with monetary ...
Journal Article
Cover Story: How the Pandemic Era Changed Price-Setting
For consumers, the prices of goods and services may seem to emerge from a black box. But behind those prices are complex judgments that firms are making about demand and about the competition, often based on limited information. Pricing decisions may also reflect uncertain assessments of the future costs of inputs. On top of that are seemingly irrational factors, like consumers' common preference for prices ending in a "9," perceiving $29.99 as markedly more appealing than $30.While price-setting is challenging even in normal times, shocks during the past few years, such as the pandemic and ...
Journal Article
Upfront: New from the Richmond Fed’s Regional Matters blog