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Survey of Price-Setting Behaviour of Canadian Companies

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Author Info
David Amirault
Carolyn Kwan
Gordon Wilkinson
Abstract

In many mainstream macroeconomic models, sticky prices play an important role in explaining the effects of monetary policy on the economy. Various theories have been set forth to explain why prices are sticky. This study takes a firm-level survey approach, in a spirit similar to Blinder et al. (1998), to shed some light on the question of why prices are sticky. In particular, the Bank of Canada's regional offices surveyed 170 Canadian firms for their views on price dynamics. The authors find that the most important motivators of price changes are price changes by competitors, changes in domestic input costs, and changes in demand. Surprisingly, but consistent with the results reported in Bils and Klenow (2002), the survey evidence suggests that more than 50 per cent of firms change their prices more than four times a year. Moreover, the survey indicates that prices change more frequently than they did ten years ago, because of more intense competition and advances in information technology.

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File URL: http://www.bankofcanada.ca/en/res/wp/2006/wp06-35.pdf
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Publisher Info
Paper provided by Bank of Canada in its series Working Papers with number 06-35.

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Length: 65 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:bca:bocawp:06-35

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Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
Phone: 613 782-8899
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Web page: http://www.bank-banque-canada.ca/

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Related research
Keywords: Inflation and prices; Transmission of monetary policy;

Find related papers by JEL classification:
D40 - Microeconomics - - Market Structure and Pricing - - - General
E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Apel, Mikael & Friberg, Richard & Hallsten, Kerstin, 2001. "Micro Foundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms," Working Paper Series 128, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
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  2. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Ball, Laurence & Romer, David, 1991. "Sticky Prices as Coordination Failure," American Economic Review, American Economic Association, vol. 81(3), pages 539-52, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luis J. Alvarez, 2007. "What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?," Kiel Working Papers 1330, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  2. Yann Algan & Edouard Challe & Xavier Ragot, 2006. "Incomplete markets and the output-inflation tradeoff," PSE Working Papers 2006-45, PSE (Ecole normale supérieure), revised Mar 2008. [Downloadable!]
  3. Jan Babecky & Kamil Dybczak & Kamil Galuscak, 2008. "Survey on Wage and Price Formation of Czech Firms," Working Papers 2008/12, Czech National Bank, Research Department. [Downloadable!]
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