The Analysis of Pricing Behavior of Firms in the Iranian Economy, Applying Wavelet Transforms Method

Subject Areas : Labor and Demographic Economics

Pooya MohammadMehdi ¹ , Reza Najarzade ^{2 *} , Hassan Heydari ³

1 - PhD student in Economics, Tarbiat Modares University, Tehran, Iran,
2 - Associate Professor, Department of Economics, Tarbiat Modares University, Tehran, Iran
3 - Assistant Professor, Department of Economics, Tarbiat Modares University, Tehran, Iran

Received: 2019-06-25 Accepted : 2020-02-04 Published : 2019-12-03

Keywords: E31, Heterogeneity, Time-dependent pricing, State-dependent pricing, Rationally inattentive behavior, JEL Classification: D83, D22. Keywords: Pricing pattern,

Abstract :

This paper investigates the adaptability of (TDP) models for pricing patterns in Iranian economy. For this purpose, price sub-indexes monthly time-series in the period of 2014(4) to 2017(11) are used. Moreover, appropriate wavelet transformation method is applied to extract pricing patterns from the time-series. Based on our findings, firstly heterogeneity is observed between pricing patterns of distinct groups of goods and services significantly which is inconsistent with (TDP) models assumption about the random distribution of price changing signals. Secondly, the pricing patterns changes over time which does not match with the assumption of uniform distribution of random signal during the time. As a result, the (TDP) models are not able to explain the pricing behavior patterns of the Iranian economy and the alternative approaches such as state-dependent pricing or rationally inattentive methods can be applied.

References:

منابع

• توکلیان، حسین، جلالی نائینی، احمدرضا (۱۳۹۶). سیاست‌گذاری پولی و ارزی صلاحدیدی و بهینه در یک الگوی تعادل عمومی پویای تصادفی برآورد شده برای اقتصاد ایران. فصلنامه پژوهش‌های اقتصادی ایران، (۷۰)۲۲: ۳۳-۹۸.


• توکلیان، حسین (1391). بررسی منحنی فیلیپس کینزی جدید در قالب یک مدل تعادل عمومی پویای تصادفی برای ایران. مجله تحقیقات اقتصادی، (۳)۴۷: ۲۲-۱.


• رحمانی، تیمور، امیری، حسین (1391). منحنی فیلیپس هایبریدی کینزین‌های جدید و بررسی تجربی آن در ایران. مجله تحقیقات اقتصادی، (۱)۴۷: ۱۱۲-۹۱.


• صارم، مهدی (۱۳۹۳). انتخاب الگوی قیمت‌گذاری مناسب برای اقتصاد ایران. فصلنامه سیاست‌ها و پژوهش‌های اقتصادی، (۷۰)۲۲: ۱۸۰-۱۶۱.


• محمدی، تیمور، باقری پرمهر، شعله (۱۳۹۴). استخراج چسبندگی قیمت در اقتصاد ایران در قالب مدل تعادل عمومی پویای تصادفی. فصلنامه تحقیقات مدلسازی اقتصادی، (۲۲)۶: ۵۹-۳۳.


• Alvarez, F., & Lippi, F. (2014). Price setting with menu cost for multiproduct firms. Econometrica, 82(1): 89–135


• Alvarez, F., Le Bihan, H., & Lippi, F. (2016). The real effects of monetary shocks in sticky price models: a sufficient statistic approach. American Economic Review, 106(10): 2817-51.


• Bils, M., & Klenow, P. (2004). Some evidence on the importance of sticky prices. Journal of Political Economy, 112(5): 947–985.


• Caballero, R., & Engel, E. (2007). Price stickiness in (S, S) models: new interpretations of Old Results. Journal of Monetary Economics, 54: 100–21.


• Calvo, Guillermo A. (1983). Staggered prices in a utility-maximizing framework. Journal of Monetary Economics, 12(3): 383–398.


• Carvalho, C., Dam, N. A., & Lee, J. W. (2010). The cross-sectional distribution of price stickiness implied by aggregate data. Review of Economics and Statistics. Economics Published 2018, DOI:10.2139/ssrn.1532278.


• https:// www. semanticscholar. org/


• Costain, James, & Nakov, A. (2011). Price adjustments in a general model of state-dependent pricing. Journal of Money, Credit and Banking, 43(2-3): 385–406.


• Costain, James, & Nakov, A. (2018). Logit price dynamics. Journal of Money, Credit and Banking, Manuscript submitted for publication.


• Eichenbaum, Martin, Jaimovich, N. & Rebelo, S. (2011). Reference prices, costs and nominal rigidities. American Economic Review, 101(1): 234–62.


• Eichenbaum, M., Jaimovich, N., Rebelo, S., & Smith, J. (2014). How frequent are small price changes? American Economic Journal: Macroeconomics, 6(2): 137-55.


• Gao, Robert X., & Yan, R. (2011). Wavelets theory and applications for manufacturing. Springer Science & Business Media.


• Gençay, R., Selçuk, F., & Whitcher, B. J. (2001). An introduction to wavelets and other filtering methods in finance and economics. Elsevier.


• Gençay, R., Gradojevic, N., Selçuk∥, F., & Whitcher, B. (2010). Asymmetry of information flow between volatilities across time scales. Quantitative Finance, 10(8): 895-915.


• Gertler, M., & Leahy, J. (2008). A Phillips curve with SS foundation. Journal of Political Economy, 116(3): 533–572.


• Golosov, M., & Lucas Jr, R. E. (2007). Menu costs and Phillips curves. Journal of Political Economy, 115(2): 171-199.


• Hall, S., Walsh, M., & Yates, A. (2000). Are UK companies' prices sticky? Oxford Economic Papers, 52(3): 425-446.


• Kehoe, P., & Midrigan, V. (2015). Prices are sticky after all. Journal of Monetary Economics, 75: 35–53.


• Klenow, P., & Malin, B. (2010). Microeconomic evidence on price setting. In Handbook of Monetary Economics, 3: 231–284. Amsterdam: Elsevier.


• Klenow, P.J., & Kryvtsov, O. (2008). State-dependent or time-dependent pricing: does it matter for recent U.S. inflation? Quarterly Journal of Economics, 123(3): 863–904.


• Kouamo, O., Charbit, M., Moulines, E., & Roueff, F. (2011). Inference of a generalized long memory process in the wavelet domain. IEEE Transactions on Signal Processing, 59(12): 5759-5773.


• Lucas Jr, R. E. (1976, January). Econometric policy evaluation: A critique. In Carnegie-Rochester conference series on public policy. Vol. 1: 19-46. North-Holland.


• Luo, S., & Villar, D. (2017). The skewness of the price change distribution: A new touchstone for sticky price models.


• Matejka, F. (2016). Rationally Inattentive Seller: Sales and Discrete Pricing. Review of Economic Studies, 83(3): 1125–1155.


• Midrigan, V. (2011). Menu costs, multi-product firms, and aggregate fluctuations. Econometrica, 79 (4): 1139–1180.


• Nakamura, E., & Steinsson, J. (2008). Five facts about prices: An evaluation of menu cost models. Quarterly Journal of Economics, 123(4): 1415–1464.


• Ramsey, J. B. (2002). Wavelets in economics and finance: Past and future. Studies in Nonlinear Dynamics & Econometrics, 6(3).


• Shumway, R. H., & Stoffer, D. S. (2017). Time series analysis and its applications: with R examples. Springer.


• Sims, C.A. (2003) Implications of rational inattention. Journal of Monetary Economics, 50(3): 665–690.


• Sims, C. A. (1998). Stickiness. In Carnegie-Rochester Conference Series on Public Policy , 49: 317-356. North-Holland.


• Taylor, J. B. (1980). Aggregate dynamics and staggered contracts. Journal of political economy, 88(1): 1-23.


• Walsh, C. E. (2017). Monetary theory and policy. MIT press.


• Woodford, M. (2009). Information-constrained state-dependent pricing. Journal of Monetary Economics, 56: 100-124.