Abstract
We use micro data on product prices linked to information on the …rms that set them to test for selection eects (state dependence) in micro-level producer pricing. In contrast to using synthetic data from a canonical menu-cost model, we …nd very weak, if any, micro-level selection eects when running price change probability regressions on actual data. Moreover, when …tting a model that nests both time- and state-dependent elements (the CalvoPlus model of Nakamura and Steinsson, 2010) to the data, the resulting parameters mimic the standard Calvo (1983) model. Thus, upstream in the supply chain, price-setting is best characterized as time-
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