Gopinath, GitaItskhoki, Oleg2017-03-082010Gopinath, Gita, and Oleg Itskhoki. 2010. Frequency of Price Adjustment and Pass-through. Quarterly Journal of Economics 125, no. 2: 675-727. DOI:10.1162/qjec.2010.125.2.6750033-5533http://nrs.harvard.edu/urn-3:HUL.InstRepos:30703806We empirically document using U.S. import prices that on average goods with a high frequency of price adjustment have a long-run pass-through that is at least twice as high as that of low-frequency adjusters. We show theoretically that this relationship should follow because variable mark-ups that reduce long-run pass-through also reduces the curvature of the profit function when expressed as a function of the cost shocks, making the firm less willing to adjust its price. Lastly, we quantitatively evaluate a dynamic menu-cost model and show that the variable mark-up channel can generate significant variation in frequency, equivalent to 37% of the observed variation in the data. On the other hand the standard workhorse model with constant elasticity of demand and Calvo or state dependent pricing has difficulty matching the facts.en-USJournal Article2017-03-0810.1162/qjec.2010.125.2.675