How Do Firms Adjust Prices in a High Inflation Environment?

How Do Firms Adjust Prices in a High Inflation Environment?

From libertystreeteconomics.newyorkfed.org

How do firms set prices? What factors do they consider, and to what extent are cost increases passed through to prices? While these are important questions in general, they become even more salient during periods of high inflation. In this blog post, we highlight preliminary results from ongoing research on firms’ price-setting behavior, a joint project between researchers at the Federal Reserve Banks of Atlanta, Cleveland, and New York. We use a combination of open-ended interviews and a quantitative survey in our analysis. Firms reported that the strength of demand was the most important factor affecting pricing ... (full story)

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