Economic Quarterly

2000

 

Fall 2000

The Frequency and Costs of Individual Price Adjustment

Alexander L. Wolman

How often do the nominal prices of individual goods change? What is the nature and magnitude of costs of price adjustment? Economists seeking to construct macroeconomic models useful for monetary policy analysis must know the answers to these questions. The empirical literature reveals that many prices change infrequently, in part because of physical costs of price adjustment. However, infrequent price adjustment also seems to be related to long-term buyer-seller relationships in ways that are not yet well understood.



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