Survey of Price-Setting Behaviour of Canadian Companies
AbstractIn 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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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 06-35.
Length: 65 pages
Date of creation: 2006
Date of revision:
Contact details of provider:
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Web page: http://www.bank-banque-canada.ca/
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-07 (All new papers)
- NEP-CBA-2006-10-07 (Central Banking)
- NEP-MAC-2006-10-07 (Macroeconomics)
- NEP-MON-2006-10-07 (Monetary Economics)
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.:
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