Stuck at Zero: Price Rigidity in a Runaway Inflation
25 Pages Posted: 28 Apr 2021 Last revised: 3 May 2021
Date Written: April 27, 2021
We use micro level retail price data from convenience stores to study the link between 0-ending price points and price rigidity during a period of a runaway inflation, when the annual inflation rate was in the range of 60%–430%. Surprisingly, we find that more round prices are less likely to adjust, and when they do adjust, the average adjustments are larger. These findings suggest that price adjustment barriers associated with round prices are strong enough to cause a systematic delay in price adjustments even in a period of a runaway inflation, when 85 percent of the prices change every month.
Keywords: Sticky Prices, Rigid Prices, 0-Ending Price Points, 9-Ending Price points, Runaway Inflation, Hyperinflation, Cost of Price Adjustment, Menu Cost
JEL Classification: D40, E31, L10, L16, M20, M30
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