Prices: Determinants and Macroeconomic Implications

Abstract

This thesis consists of three essays that study prices, their determinants, and their role in macroeconomic outcomes. A running thread is that macroeconomic phenomena typically attributed to forces on one side of the economy—demand or supply—are often influenced by forces on the other side. The first chapter explores the role of changes in the composition of demand in the rise in markups in the U.S. economy. The second chapter shows that the incomplete pass-through of commodity price changes to downstream prices, typically ascribed to the shape of demand curves, can arise from constraints facing firms. The third chapter shows that fluctuations in total factor productivity may in fact be endogenous responses to demand shocks. Methodologically, these essays share a focus on using micro-data to inform models of firm behavior and macroeconomic fluctuations.