We isolate the anticipation effect of uncertainty on firms’ price-setting behavior using a quasi-natural experiment: the 2019 Social Uprising in Chile. During the 31-day period following the outbreak of nationwide protests and riots, the frequency of supermarket price changes fell by about half, while the average size of adjustments rose by about half. Suppliers’ prices remained stable, and local intensity of riots does not explain the variation, suggesting a forward-looking mechanism. A menu cost model with news about future idiosyncratic demand volatility replicates these dynamics. Anticipated uncertainty amplifies the short-run real effects of monetary policy, highlighting the importance of timing.
First Draft : December 2021
Paper
Most Recent Working Paper [June 2026]
NBER Working Paper [June 2024, updated June 2026]