market share and price rigidity abstract survey evidence shows that the main reason why firms keep prices stable is that they are concerned about losing customers or market share we construct a general equilibrium model in which firms care about the size of their customer base firms and customers form long term relationships because consumers incur costs to switch sellers in an environment with sectoral productivity shocks we show that cost pass through is a non monotonic function of the size of switching costs specifically prices tend to become more stable as the fraction of repeat customers increases and the elasticity of the customer base falls

price changes in the euro area and the united states some facts from individual consumer price data prices of goods and services do not adjust immediately in response to changing demand and supply conditions this paper characterizes the average frequency and size of price changes in the euro area and its member countries investigates the determinants of the probability of price changes and compares the evidence for the euro area with available u s results the facts documented in this paper are based on evidence from individual price data recorded at the store level in all euro area countries except ireland and greece that is in datasets covering austria belgium finland france germany italy luxembourg the netherlands portugal and spain which together account for around 97 percent of euro area gdp the data used are the monthly price records underlying the computation of national consumer price indices and harmonized consumer price indices these data cover a large number of products selected on the basis of extensive household budget surveys

financial deepening trade openness and economic growth in latin america and the caribbean this contribution investigates the causal interactions between financial deepening trade openness and economic growth in 13 latin american and caribbean countries we construct a composite indicator for financial deepening and use it to detect granger causality within a modified vector autoregressive vector error correction model var vecm framework we find almost no evidence for the popular hypothesis of finance led growth evidence of bidirectional finance growth causality is stronger but mostly instable in the long run most results indicate a demand following or insignificant causal relationship between finance and growth there is also no evidence that finance indirectly induces growth via the channel of trade openness hence policies that prioritize financial and trade sector development cannot be supported

a wavelet analysis of capital markets integration in latin america the continuous wavelet transform analysis may provide a rich and flexible framework for the analysis of time series which exhibit less stable statistical properties such as the ones describing the dynamic trajectory of capital markets in contrast to the fourier analysis wavelet transform preserves information on both time and frequency we provide a summary of the most important features of this framework by involving the concept of coherence as well as its partial and multiple forms we analyse the connections between santiago stock exchange mexican stock exchange and bm fbovespa sao paulo stock exchange for a time span which covers the 23 september 2003 12 march 2014 period we highlight the existence of several significant forces of regional integration and of a short to medium run synchronization process between these markets we conclude that deeper structural and institutional reforms are required in order to enhance the sustainable development and more profound integration of these markets

heterogeneity and output fluctuations in a dynamic menu cost economy when firms face menu costs the relation between their output and money is highly non linear at the aggregate level however this needs not be so in this paper we study the dynamic behaviour of a menu cost economy where firms are heterogeneous in the shocks they perceive and the demands and adjustment costs they face in this context we i generalize the caplin and spulber 1987 steady state monetary neutrality result ii show that uniqueness of equilibria depends not only on the degree of strategic complementarities but also on the degree of dispersion of firms positions in their price cycle iii characterize the path of output outside the steady state and show that as strategic complementarities become more important expansions become longer and smoother than contractions and iv show that the potential impact of monetary shocks is an increasing function of the distance of the economy from its steady state but that an uninformed policy maker will have no effect on output on average

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

international economic policy uncertainty and stock prices revisited multiple and partial wavelet approach abstract this paper introduces a new dimension to the relationship between economic policy uncertainty epu and stock prices sp by extending the contributions of ko and lee 2015 by using multiple and partial wavelet coherence techniques the vulnerability of sp due to combined and isolated impact of international us epu and domestic policy uncertainty depu is investigated the main findings are a the combined effect of depu and us epu is more significant for developed market s sp b the emerging market s sp are more sensitive to depu and c amongst developed markets japan and european countries are more sensitive to us epu than depu

menu costs and the neutrality of money a model of endogenous price adjustment under money growth is presented firms follow s s pricing policies and price revisions are imperfectly synchronized in the aggregate price stickiness disappears and money is neutral the connection between firm price adjustment and relative price variability in the presence of monetary growth is also investigated the results contrast with those obtained in models with exogenous fixed timing of price adjustment

the new econometrics of structural change dating breaks in u s labor productivity we have seen the emergence of three major innovations in the econometrics of structural change in the past fifteen years 1 tests for a structural break of unknown timing 2 estimation of the timing of a structural break and 3 tests to distinguish unit roots from broken time trends these three innovations have dramatically altered the face of applied time series econometrics in this paper we review these three innovations and illustrate their application through an empirical assessment of u s labor productivity in the manufacturing durables sector

trend and cyclical decoupling new estimates based on spectral causality tests and wavelet correlations the issue of decoupling of emerging market economies emes especially in the asian region from the developments in advanced economies has become a subject of lively debate in recent years basically decoupling seems to comprise three sub hypotheses i growth spillovers from advanced countries to emes decreasing progressively in importance ii business cycles in emes becoming less synchronized with those of the advanced world and iii strengthening of growth spillovers and cyclical synchronization among the emes as a group the received literature fails to distinguish adequately between the trend and cyclical aspects of the decoupling relationship we resort to two frequency domain methods nonstationary spectral causality testing and wavelet correlations which seem to offer a neat separation of trend and cyclical decoupling based on a sample of seven emes from the asian region including the two large emes china and india we uncover strong evidence favouring both trend and cyclical decoupling

modelling the linkages between us and latin american stock markets this paper examines the linkages between us and latin american stock markets during the 1995 2002 period using recently developed cointegration techniques that allow for structural shifts in the long run relationship results suggest that when conventional cointegration tests are applied a long run relationship is found only in the cases of brazil and mexico for the dow jones dj index and in the case of brazil for the standard and poor s 500 sp500 index in contrast if the possibility of structural breaks is introduced strong evidence is found in favour of such a relationship between the argentine chilean and venezuelan indices and the dj index after the 1998 financial turmoil and between the brazilian and mexican indices and the dj index before such turbulence while some marginal cointegration is detected between the mexican and dj indices from february 1998 additionally evidence is found of a cointegrating relationship between the argentine chilean and mexican indices and the sp500 index f

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

price stickiness in ss models new interpretations of old results abstract what is the relation between infrequent price adjustment and the dynamic response of the aggregate price level to monetary shocks the answer to this question ranges from a one to one link calvo g 1983 prices in a utility maximizing framework journal of monetary economics 12 383 398 to no connection whatsoever caplin a spulber d 1987 menu costs and the neutrality of money quarterly journal of economics 102 703 726 the purpose of this paper is to provide a unified framework to understand the mechanisms behind this wide range of results in doing so we propose new interpretations of key results in this area which in turn suggest the kind of ss model that is likely to generate substantial price rigidity among these new interpretations we revisit caplin and spulber s monetary neutrality result we show that when price stickiness is measured in terms of the impulse response function this result is not a consequence of aggregation as is often assumed but is due instead to the absence of price stickiness at the microeconomic level we also show that the selection effect according to which units that adjust their prices are those that benefit the most is neither necessary nor sufficient to account for the higher aggregate flexibility of ss type models compared to calvo models instead the key concept is the contribution of the extensive margin of adjustment to the aggregate price response the aggregate price level is more flexible than suggested by the microeconomic frequency of adjustment if and only if this term is positive

a dynamic economy with costly price adjustments this paper studies a general equilibrium model of a dynamic economy with menu costs each firm s productivity is exposed to idiosyncratic and aggregate productivity shocks around a trend and the money supply to monetary shocks around a trend all consumption pricing and production decisions are based on optimizing behavior there exists a staggered markov perfect equilibrium with prices determined by a two sided s s markup strategy the paper analyzes the optimal markup strategy and investigates the dynamics of the price index and the aggregate output the welfare consequences of the uncertain aggregate productivity and money supply are also examined

a re examination of financial development stock markets development and economic growth this study provides new evidence on the role of financial development and stock market development in accounting for economic growth across geographic regions and income groups to derive feasible policy implications we estimate not only unbalanced panel regressions with period fixed effects but also variance decompositions of annual gross domestic product gdp growth rates to examine what proxy measures are most important in economic growth over time and how much they contribute to economic growth we find distinct direction timing and strength of the causal links between financial development stock market development and economic growth based on the results of granger causality tests therefore it may be necessary to make different efforts to achieve steady economic growth across geographic regions and income groups

microeconomic adjustment hazards and aggregate dynamics the basic premise of this paper is that understanding aggregate dynamics requires considering that agents are heterogeneous and that they do not adjust continuously to the shocks they perceive we provide a general characterization of lumpy behavior at the microeconomic level in terms of an adjustment hazard function which relates the probability that a unit adjusts to the deviation of its state variable from its moving target we characterize rich cross sectionally dependent aggregate dynamics generated by nonconstant hazards we present an example based on u s manufacturing employment and job flows and find that increasinghazard models outperform constant hazard partial adjustment models in describing aggregate employment dynamics

on the detection of extreme movements and persistent behaviour in mediterranean stock markets a wavelet based approach we combine the global hurst exponent and morlet wavelet multi resolution analysis mra to investigate the dynamic behaviour of six selected stock markets in the mediterranean region specifically we employ the resonance coefficients and their power spectra to identify potential extreme movements and long term dependence in stock returns using weekly data for the period 2005 to 2010 our results reveal that the wavelet mra is able to reconstruct the effects of major extreme shocks on stock returns of studied markets such as the asian financial crisis the 9 11 terrorist attacks and the 2007 2009 financial crisis moreover the wavelet based global hurst exponent indicates the presence of long term dependencies in stock returns of all the considered markets except for france where the anti persistent behaviour is detected overall our findings are useful to assess the stock market efficiency and provide new insights into stock market dynamics over different time scales

monetary non neutrality in a multisector menu cost model empirical evidence suggests that as much as one third of the u s business cycle is due to nominal shocks we calibrate a multisector menu cost model using new evidence on the cross sectional distribution of the frequency and size of price changes in the u s economy we augment the model to incorporate intermediate inputs we show that the introduction of heterogeneity in the frequency of price change triples the degree of monetary non neutrality generated by the model we furthermore show that the introduction of intermediate inputs raises the degree of monetary non neutrality by another factor of three without adversely affecting the model s ability to match the large average size of price changes a single sector model with a frequency of price change equal to the median rather than the mean generates monetary non neutrality similar to that in our multisector model our multisector model with intermediate inputs generates variation in real output in response to calibrated aggregate nominal shocks that can account for roughly 23 of the u s business cycle

consumer durables evidence on the optimality of usually doing nothing the authors argue that lumpy nonconvex transaction costs are the norm for a wide range of economic decisions which are thus characterized by inertial behavior application of this idea to the consumption of durable goods yields an s s decision rule which when aggregated highlights the different expected behavior of average expenditure per purchase versus the number of purchases the empirical implications of this rule are presented and compared to other theories a battery of empirical tests generally supports the predictions of the model in particular it does a good job of explaining the time pattern of response of spending on durables to a change in income copyright 1992 by ohio state university press

state dependent pricing and the general equilibrium dynamics of money and output economists have long suggested that nominal product prices are changed infrequently because of fixed costs in such a setting optimal price adjustment should depend on the state of the economy yet while widely discussed statedependent pricing has proved difficult to incorporate into macroeconomic models this paper develops a new tractable theoretical state dependent pricing framework we use it to study how optimal pricing depends on the persistence of monetary shocks the elasticities of labor supply and goods demand and the interest sensitivity of money demand

an index heuristic for transshipment decisions in multi location inventory systems based on a pairwise decomposition in multi location inventory systems transshipments are often used to improve customer service and reduce cost determining optimal transshipment policies for such systems involves a complex optimisation problem that is only tractable for systems with few locations consequently simple heuristic transshipment policies are often applied in practice this paper develops an approximate solution method which applies decomposition to reduce a markov decision process model of a multi location inventory system into a number of models involving only two locations the value functions from the subproblems are used to estimate the fair charge for the inventory provided in a transshipment this estimate of the fair charge is used as the decision criterion in a heuristic transshipment policy for the multi location system a numerical study shows that the proposed heuristic can deliver considerable cost savings compared to the simple heuristics often used in practice