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Prices and inflation in a pandemic - a micro data approach

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  • Richard Davies

Abstract

The Covid-19 lockdowns and recession are the most exceptional economic events in living memory and will impact the economy for years to come. One vital channel is via price changes. Price rises and cuts alter real wages, influencing consumer spending power. They have knock-on effects, via the official consumer price index (CPI) on regulated payments and costs including pensions, inflation-protected bonds and utilities. The degree of price flexibility in an economy also influences the impact of monetary policy. The way prices are evolving is thus a vital question in understanding the economic impact of pandemic. While some Covid-19 related questions will take years to answer, the availability of 'micro' data for the UK means that the impact on prices is something we can track in close to real time. The price data used in this briefing come from monthly records collected and published by the Office for National Statistics (ONS). The monthly 'price quote' files track the item sold, the shop selling it, and the UK region in which it is located. Data are available between February 1988 and December 2020. The final clean dataset contains 36m observations.

Suggested Citation

  • Richard Davies, 2021. "Prices and inflation in a pandemic - a micro data approach," CEP Covid-19 Analyses cepcovid-19-017, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepcvd:cepcovid-19-017
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    File URL: https://cep.lse.ac.uk/pubs/download/cepcovid-19-017.pdf
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    References listed on IDEAS

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    1. Emi Nakamura & Jón Steinsson & Patrick Sun & Daniel Villar, 2018. "The Elusive Costs of Inflation: Price Dispersion during the U.S. Great Inflation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(4), pages 1933-1980.
    2. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
    3. Jaravel, Xavier & O'Connell, Martin, 2020. "Real-time price indices: Inflation spike and falling product variety during the Great Lockdown," Journal of Public Economics, Elsevier, vol. 191(C).
    4. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1415-1464.
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    Cited by:

    1. Josh De Lyon & Swati Dhingra, 2021. "The impacts of Covid-19 and Brexit on the UK economy: early evidence in 2021," CEP Covid-19 Analyses cepcovid-19-021, Centre for Economic Performance, LSE.
    2. Costin Radu Boldea & Bogdan Ion Boldea & Tiberiu Iancu, 2023. "The Pandemic Waves’ Impact on the Crude Oil Price and the Rise of Consumer Price Index: Case Study for Six European Countries," Sustainability, MDPI, vol. 15(8), pages 1-15, April.

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    Keywords

    Covid-19; inflation; firm size; price changes;
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