Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336336 
Year of Publication: 
2022
Citation: 
[Journal:] Latin American Journal of Central Banking (LAJCB) [ISSN:] 2666-1438 [Volume:] 3 [Issue:] 1 [Article No.:] 100048 [Year:] 2022 [Pages:] 1-15
Publisher: 
Elsevier, Amsterdam
Abstract: 
This paper uses a rich weekly price database from the largest supermarket in Uruguay to analyze the relationship among prices, micro-level sales, and business cycle conditions. On average, 7% of products were on sale each month, and we show a positive and statistically significant but small relationship between sales and unemployment at the aggregate level, controlling for product and time effects. For each product category, there is a high and positive statistically significant association for these variables. Also, for some categories like food products, alcoholic drinks, beverages, and fruits and vegetables, we found a large, negative, and statistically significant relationship between the probability of being on sale and employment. The mechanism we tested is the following: As the economy worsens and unemployment rises (and/or employment falls), the supermarket uses sales to adjust prices while keeping reference prices fixed. Our results indicate that sales do not alleviate much of the price rigidity in economic recessions. We also studied sales behavior through a principal component analysis in the time domain. This analysis revealed that the first two principal components explained more than half of each sector's variance in price dynamics. These components are significantly correlated with variations in unemployment and employment. Additionally, we found that movement in the principal components across sectors systematically Granger-cause employment changes.
Subjects: 
Price rigidity
Sales
Unemployment
Time series principal component analysis
JEL: 
E31
E32
E24
C38
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.