Essays on price setting and inflation
Carregando...
Arquivos
Data
2025-05-06
Autores
Orientador(res)
Guimarães, Bernardo de Vasconcellos
Métricas
Título da Revista
ISSN da Revista
Título de Volume
Resumo
This thesis consists of three chapters. The first two contribute to the literature on price-setting, while the third examines the impact of inflation surprises on asset returns. The first chapter proposes a direct estimation method for strategic complementarity, where a firm’s desired price depends on others’ prices. If strategic complementarity is significant, both the prices and timing of a firm’s closest competitors should influence its decisions. The results indicate weaker complementarity than previously suggested: a firm’s probability of changing prices correlates positively with the average price change of all firms but negatively with its nearest competitor’s price change. These findings challenge established views on strategic complementarity. The second chapter extends this analysis with a theoretical model based on Woodford (2005), incorporating firms’ consideration of their nearest competitors’ prices. Assuming common shocks and localized complementarity, the model derives a direct relationship between a firm’s price and its competitor’s. The estimated strategic complementarity parameter is negative and significant, indicating firms follow a substitution strategy rather than local complementarity. The third chapter explores how inflation surprises affect intraday stock returns in Brazil. It addresses three questions: (1) Do unanticipated CPI announcements influence stock returns? (2) How long does the impact persist? (3) Does market interpretation depend on economic conditions? Results show that market reactions to pooled inflation shocks are negative within the first ten minutes, while positive shocks have no significant effect. Economic conditions matter: during expansions, negative shocks lead to a positive stock market response within ten minutes, while positive shocks have no impact. In stable conditions, positive shocks affect returns for 5–10 minutes, while negative shocks have no effect. During slowdowns, positive shocks negatively affect returns for 10–15 minutes, while negative shocks generate a positive response within ten minutes. These findings offer new insights into how inflation surprises shape stock market behavior.