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

Bernardo Guimaraes, Celio Feltrin Jr

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.

Keywords


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

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DOI: http://dx.doi.org/10.12660/bre.v99n992016.56757

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