Macroeconomic price stickiness: Evidence from the postwar United States

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

This paper econometrically investigates price stickiness within the macroeconomy. We derive a test for the existence of price inflexibility involving the difference between aggregate output growth and expenditure growth. Results using quarterly U.S. data for the post-price control era reject price flexibility and generally satisfy criteria predicted by non-market clearing behavior. We also estimate the magnitude of price inflexibility using several aggregate demand-aggregate supply models with nominal wage contracting. The findings generally indicate that prices exhibit stickiness but not rigidity. The study contributes empirical support at the aggregate level for New Keynesian macroeconomics.

Original languageEnglish (US)
Pages (from-to)427-442
Number of pages16
JournalJournal of Economics and Business
Volume48
Issue number5
StatePublished - Dec 1 1996

Keywords

  • AD-AS models
  • Non-market clearing
  • Price stickiness

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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