The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications

Abstract

helpful comments. This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF, IMF policy, or the National Bureau of Economic Research. Gorodnichenko thanks NSF for financial support. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Shopping Around: How Households Adjusted Food Spending Over the Great Recession

“…Rather, households increase time spent shopping and in home production to hold their food consumption broadly constant over retirement, in part due to the fall in their opportunity cost of time. Nevo and Wong (2014) and Coibion et al (2014) show that US households used similar mechanisms to cope with the Great Recession. In this paper we show that in response to unexpected worsening in the economic environment, households acted to smooth two aspects of their consumption-total calories and their nutritional quality-by increasing their shopping effort and adjusting other aspects of consumption, namely the characteristics of their shopping basket.…”

“…We add to a growing body of literature on how households alter their shopping behaviour during economic downturns. Recent evidence from the USA suggests that as economic conditions worsen, households spend more time shopping and pay lower prices (Kaplan and Menzio 2015), increase their use of sales, switch to generic products (Nevo and Wong 2014), and switch to low-price retailers (Coibion et al 2014).…”

Working Less and Bargain Hunting More: Macroimplications of Sales during Japan's Lost Decades

“…Consistent with our empirical results, an increasing number of recent studies such as Klenow and Willis (2007) and Kryvtsov and Vincent (2015) show that business cycles in the United States and the United Kingdom influence sales decisions. Coibion, Gorodnichenko, and Hong (2015) find evidence of consumer switching from high-to low-end stores during recessions. Regarding the interaction between hours worked and bargain hunting, Nevo and Wong (2015) document the increase in shopping intensity and the decline in households' opportunity cost of time during the Great Recession.…”

“…These studies are related to the literature on consumer search regarding how consumers search across shops and products influences how retailers set prices. Although they do not explicitly model temporary sales, studies incorporating consumer search and price setting include those by Benabou (1988), Watanabe (2008), and Coibion, Gorodnichenko, and Hong (2015). Our study is also related to that by Kehoe and Midrigan (2015), which has a similar research interest to ours (i.e., examining the stickiness of the aggregate price level and the real effect of monetary policy), although they do not construct their model based on consumer heterogeneity.…”

Price Dispersion and Demand Uncertainty: Evidence From U.S. Scanner Data

“…I assume that a sale occurs when a drop in the price of at least 10% is followed by a price that is equal to or above the pre-sale price within four weeks. Similar definitions were used by Nakamura and Steinsson (2008) and by Coibion et al (2015). 17 The frequency of sale is defined by the percentage of the UPC-store-week cells that are labeled as sales out of the total number of UPC-store-week cells.…”