Inflation Dynamics During the Financial Crisis

Simon Gilchrist, Raphael Schoenle, Jae Sim and Egon Zakrajšek ()

No 22827, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a novel dataset, which merges good-level prices underlying the PPI with the respondents’ balance sheets, we show that liquidity constrained firms increased prices in 2008, while their unconstrained counterparts cut prices. We develop a model in which firms face financial frictions while setting prices in customer markets. Financial distortions create an incentive for firms to raise prices in response to adverse financial or demand shocks. This reaction reflects the firms’ decisions to preserve internal liquidity and avoid accessing external finance, factors that strengthen the countercyclical behavior of markups and attenuate the response of inflation to fluctuations in output.

JEL-codes: E31 E32 E44 (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Simon Gilchrist & Raphael Schoenle & Jae Sim & Egon Zakrajšek, 2017. "Inflation Dynamics during the Financial Crisis," American Economic Review, American Economic Association, vol. 107(3), pages 785-823, March.

Downloads: (external link)
http://www.nber.org/papers/w22827.pdf (application/pdf)

Related works:
Journal Article: Inflation Dynamics during the Financial Crisis (2017)
Working Paper: Inflation dynamics during the financial crisis (2015)
Working Paper: Inflation Dynamics During the Financial Crisis (2015)
Working Paper: Inflation Dynamics During the Financial Crisis (2014)
Working Paper: Inflation Dynamics During the Financial Crisis (2013)
Working Paper: Inflation Dynamics During the Financial Crisis (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:22827

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w22827

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().