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Consumer price behaviour in Luxembourg: evidence from micro CPI data

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  • Patrick Lünnemann
  • Thomas Mathä

Abstract

This paper uses micro-level price data and analyses the behaviour of consumer prices in Luxembourg. We find that the median duration of consumer prices is roughly 8 months. The median durations of energy and unprocessed food are about 1.5 and 5 months, while prices of services typically change fewer than once a year. For some product types, such as non-energy industrial goods and processed food, a relatively large share of the observed price changes is reverted afterwards. With the exception of services, individual prices do not show signs of downward rigidity. On average, price decreases are as large as price increases. Price changes are determined both by state- and time-dependent factors. Accumulated price and wage inflation, wage adjustment due to indexation, the cash changeover and a larger number of competitors increase the probability of a price change, while pricing at attractive pricing points and price regulation have the opposite effect

Suggested Citation

  • Patrick Lünnemann & Thomas Mathä, 2005. "Consumer price behaviour in Luxembourg: evidence from micro CPI data," BCL working papers 17, Central Bank of Luxembourg.
    • Handle: RePEc:bcl:bclwop:bclwp017
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    More about this item

    Keywords

    Price setting; consumer prices; rigidity; wage indexation; sales;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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