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. JEL classification: E31, D40, D21
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Volume (Year): (2007) Issue (Month): 1 (April 2007) Pages: 85-99 Download reference. The following formats are available: HTML
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Levy, Daniel & Lee, Dongwon & Chen, Allan (Haipeng) & Kauffman, Robert & Bergen, Mark, 2007.
"Price Points and Price Rigidity,"
MPRA Paper
1472, University Library of Munich, Germany.
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Daniel Levy & Dongwon Lee & Haipeng Chen & Robert Kauffman & Mark Bergen, 2008.
"Price Points and Price Rigidity,"
Emory Economics
0809, Department of Economics, Emory University (Atlanta).
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Daniel Levy & Dongwon Lee & Haipeng Allan Chen & Robert J. Kauffman & Mark Bergen, 2007.
"Price Points and Price Rigidity,"
Working Paper Series
04-07, Rimini Centre for Economic Analysis, revised Jul 2007.
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