Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81874
Authors: 
Carlsson, Mikael
Nordström Skans, Oskar
Year of Publication: 
2009
Series/Report no.: 
Sveriges Riksbank Working Paper Series 231
Abstract: 
Using data on product-level prices matched to the producing firm's unit labor cost, we reject the hypothesis of a full and immediate pass-through of marginal cost. Since we focus on idiosyncratic variation, this does not fit the predictions of the Ma'ckowiak and Wiederholt (2009) version of the Rational Inattention Model. Neither do we find that firms react strongly to predictable marginal cost changes, as expected from the Mankiw and Reis (2002) Sticky Information Model. We find that, in line with Staggered Contracts models, firms consider both the current and future expected marginal cost when setting prices with a sum of coeffients cients not significantly different from unity.
Subjects: 
Price Setting
Business Cycles
Information
Micro Data
JEL: 
D80
E30
L16
Document Type: 
Working Paper

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