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Price stickiness in Portugal evidence from survey data

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  • Fernando Martins

Abstract

This paper analyses the results of a survey conducted on a sample of Portuguese firms, with the main purpose of investigating their price setting behaviour. The evidence points to a considerable degree of price stickiness: most firms do not change prices more than once a year; time lags in price reactions to shocks are significant; and more than half of the firms follow time-dependent price reviewing and build their price decisions disregarding any indication of future economic developments. Implicit contracts between firms and their customers under which the former pledge to stabilise their prices as a way to increase customers' loyalty are apparently the main reason preventing firms from changing their prices more frequently. Copyright © 2009 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1483
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 31 (2010)
Issue (Month): 2-3 ()
Pages: 123-134

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Handle: RePEc:wly:mgtdec:v:31:y:2010:i:2-3:p:123-134

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  2. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  3. Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data," Macroeconomics 0402021, EconWPA.
  4. Fabiani, Silvia & Druant, Martine & Hernando, Ignacio & Kwapil, Claudia & Landau, Bettina & Loupias, Claire & Martins, Fernando & Mathä, Thomas Y. & Sabbatini, Roberto & Stahl, Harald & Stokman, Ad C, 2005. "The pricing behaviour of firms in the euro area: new survey evidence," Working Paper Series 0535, European Central Bank.
  5. Jordi Gali & Mark Gertler & J. David Lopez-Salido, 2001. "European Inflation Dynamics," NBER Working Papers 8218, National Bureau of Economic Research, Inc.
  6. Smets, Frank, 2003. "Maintaining price stability: how long is the medium term?," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1293-1309, September.
  7. Martins, Fernando, 2005. "The price setting behaviour of Portuguese firms: evidence from survey data," Working Paper Series 0562, European Central Bank.
  8. Fabiani, Silvia & Loupias, Claire & Martins, Fernando & Sabbatini, Roberto (ed.), 2007. "Pricing Decisions in the Euro Area: How Firms Set Prices and Why," OUP Catalogue, Oxford University Press, number 9780195309287.
  9. John M. Roberts, 1994. "Is inflation sticky?," Working Paper Series / Economic Activity Section 152, Board of Governors of the Federal Reserve System (U.S.).
  10. Ball, Laurence & Romer, David, 1990. "Real Rigidities and the Non-neutrality of Money," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 183-203, April.
  11. Hall, Simon & Walsh, Mark & Yates, Anthony, 2000. "Are UK Companies' Prices Sticky?," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 425-46, July.
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Cited by:
  1. Steffen Ahrens & Inske Pirschel & Dennis Snower, 2014. "A Theory of Price Adjustment under Loss Aversion," Kiel Working Papers 1915, Kiel Institute for the World Economy.
  2. Fernando Martins, 2013. "Survey evidence on price and wage rigidities in Portugal," Working Papers w201312, Banco de Portugal, Economics and Research Department.
  3. Peter Burgold, 2013. "Nominale Abwertung innerhalb einer Währungsunion," Global Financial Markets Working Paper Series 47-2013, Friedrich-Schiller-University Jena.

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