Time-Dependent or State-Dependent Pricing? Evidence From a Large Devaluation

Authors

  • Bernardo Guimaraes Escola de Economia de Sao Paulo - FGV
  • Celio Feltrin Jr

DOI:

https://doi.org/10.12660/bre.v99n992016.56757

Keywords:

state-dependent pricing, time-dependent pricing, currency devaluation, frequency of price changes

Abstract

State-dependent and time-dependent price setting models yield distinct implications for how frequency and magnitude of price changes react to shocks. This note studies pricing behavior in Brazil following the large devaluation of the Brazilian Real in 1999 to distinguish between models. The results are consistent with state-dependent pricing.

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Published

2016-11-01

Issue

Vol. 36 No. 2 (2016)

Section

Articles