The paper explains the observed asymmetric inflation response to value-added tax (VAT) changes in Hungary by calibrating a standard sectoral menu cost model on a new micro-level CPI data set. The model is able to reproduce important moments of the data, and finds that the asymmetry can be...

One of the most fundamental questions in public finance is who bears the burden of taxes -- the incidence of taxation.' Our understanding of incidence from an empirical standpoint is quite meager. Indeed, there seems to be little evidence even in the case that is theoretically the easiest --...

We document a causal role for price endings in generating micro and macro price rigidity. Based on micro price data underlying the consumer price index in Israel, we document that most stores have a favored price ending—a final digit, usually a zero or nine, used by a majority of prices in...

Measuring the consumption response to a tax regime has been a central issue in the optimal design of fiscal policy. This study leverages a large-scale natural experiment in India, the 2017 Goods-Service-Tax (GST) Reform, to quantify its impact on suppliers' pricing strategy and consumer...