Abstract

We estimate probability and size of price change conditional upon the deviation of a price from its target level for a large number of individual wholesale and consumer price indices in Japan. We find robust and strong asymmetry in price adjustments, especially among CPIs. Cross section variations in price responsiveness depend upon characteristics of distribution channels, in particular, efficiency and input measures of distributive services. Using a simulation model, we also find that the macroscopic downward rigidity almost disappears if the size of the shock is small compared to the target inflation rate.

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