Abstract
We study the speed of price reactions to positive and negative demand and cost shocks. Our findings suggest that price adjustment lags vary in line with the predictions of optimal price setting models. Moreover, we find that the firms’reactions are asymmetric, and that theseasymmetriescannotbefullyexplainedbyanysingletheoreticalmodelofasymmetric price adjustment. Overall, these results suggest that the reaction to monetary policy shocks may depend on which firms or sectors are particularly affected by them and, therefore, that richer models are needed to fully understand the effects of monetary policy.