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Price Setting in Austria before and after the Euro Cash Changeover: Has Anything Changed in the Last Five Years?

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Abstract

This study addresses the question of whether the price adjustment process in Austria has changed since the changeover to euro notes and coins at the beginning of 2002. For this purpose, we analyze the frequency and size of price adjustments, sectoral and seasonal differences as well as the structure of prices (notably the share of attractive prices) on the basis of micro price observations underlying the Austrian Consumer Price Index (CPI). A data set spanning the period from 1996 to mid-2006 was used for the analysis. In addition to confirming known results from previous studies – i.e. that price adjustments occur roughly once per year on average, but with strong sectoral differences – our study reveals an unchanged seasonal pattern of price adjustments, with major peaks in January, also after the cash changeover. At the time of the changeover itself, the observed price changes were more frequent but smaller than usual. As upward and downward price adjustments were also roughly balanced, the cash changeover appears to have had no significant overall inflationary effects, confirming previous studies. The share of attractive prices (i.e. prices ending in 9 or 90, and even prices), which was over 60% before the cash changeover, plummeted to just over 20% in early 2002. In the course of the ensuing three to four years, however, this share again approached the level observed prior to the transition. From these results we conclude that price-setting habits as well as the structure of Austrian consumer prices has not changed significantly since the cash changeover.

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File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Monetary-Policy-and-the-Economy/2007/Monetary-Policy-and-the-Economy-Q1-07/chapters/mop_2007_q1_in_focus_03_tcm16-56382.pdf
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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2007)
Issue (Month): 1 ()
Pages: 85–99

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Handle: RePEc:onb:oenbmp:y:2007:i:1:b:4

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Keywords: Consumer prices; frequency and size of price changes; attractive prices.;

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References

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  1. Daniel Levy & Dongwon Lee & Haipeng (Allan) Chen & Robert J. Kauffman & Mark Bergen, 2011. "Price Points and Price Rigidity," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1417-1431, November.
  2. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 20(2), pages 171-192, Spring.
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Cited by:
  1. Edward S. Knotek II, 2005. "Convenient prices, currency, and nominal rigidity : theory with evidence from newspaper prices," Research Working Paper, Federal Reserve Bank of Kansas City RWP 05-11, Federal Reserve Bank of Kansas City.
  2. Emmanuel Dhyne & Jerzy Konieczny & Fabio Rumler & Patrick Sevestre, 2009. "Price rigidity in the euro area - An assessment," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 380, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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