This paper studies the macroeconomic relevance of product size adjustment - changes in products' weight or volume - using U.K. CPI price microdata from 2012-2023: (i) Product size is relevant for 35% of the CPI. (ii) Each month, up to 0.7% of goods undergo size changes (up to 3% in the Food sector or 60% for products like chocolate). (iii) 80% of adjustments are size reductions, with 90% of them being "downgrades", i.e., raising the unit price. (iv) Size reductions and downgrades are strongly procyclical. Size increases and upgrades are acyclical. (v) Nominal price and product size adjustment are largely unrelated.
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Project title:
Should central banks modify their inflation targeting framework when agents are boundedly rational?: 18611 (Österreichische Nationalbank, Jubiläumsfonds) Die Rolle der sich verändernden Marktstruktur für die aktuelle Inflationsdynamik und Geldpolitik: 18915 (Österreichische Nationalbank, Jubiläumsfonds)
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Research Areas:
Mathematical Methods in Economics: 70% Modeling and Simulation: 30%