Product Quality and International Price Dynamics over the Business Cycle
Bibliographic Data
| ID | 9724382 |
|---|---|
| Authors | Marta Arespa (0000-0002-8207-6855, Universitat de Barcelona Spain), Diego Gruber (Gamma Boston Consulting Group Barcelona Spain) |
| Year | 2021 |
| Volume | 88 |
| Issue | 352 |
| Pages | 1054-1074 |
| Publication date | 2021-10-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Economica (JOURNAL) |
| Journal identifiers | ISSN: 0013-0427 • E-ISSN: 1468-0335 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1111/ecca.12380 |
| OpenAlex | W3175204617 |
| Language | EN |
| References cited | 21 |
Two puzzling facts of international real business cycles are (1) weak or negative correlations between the terms of trade and output, and (2) a rise in relative consumption for countries where national goods become relatively more expensive. We show that these puzzles either vanish or become much weaker in recent data. We propose a new mechanism that generates endogenous international price movements that are consistent with both the ‘old’ and the ‘new’ facts. In this mechanism, firms operating in a monopolistically competitive environment adjust price and quality of their products in response to technological shocks. This model is consistent with the old facts if price levels are not adjusted for quality. Instead, if quality adjustments to price level are introduced, then the model’s properties are in line with the new facts
Business cycle · Consumption (sociology) · Econometrics · Economics · Macroeconomics · Mechanism (biology) · Microeconomics · Monetary economics · Product (mathematics) · Production (economics) · Quality (philosophy) · Relative price · Economic Growth and Productivity · Global trade and economics · Monetary Policy and Economic Impact
| Citation velocity | historical |
|---|---|
| Highly cited | No |