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Price rigidity. Evidence from the French CPI micro-data

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Author Info
Laurent Baudry () (University of Lille I)
Hervé Le Bihan () (Banque de France)
Patrick Sevestre () (Université Paris XII)
Sylvie Tarrieu () (Banque de France - Centre de Recherche)

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Abstract

Based upon a large fraction of the price records used for computing the French CPI, we document consumer price rigidity in France. We first provide a methodological discussion of issues involved in estimating average price duration with micro-data. The average duration of prices in the sectors covered by the database (65% of CPI) is then found to be around 8 months. A strong heterogeneity across sectors both in the average duration of prices and in the pattern of price setting is reported. There is no clear evidence of downward nominal rigidity, since price cuts are almost as frequent as price rises. Moreover, the average size of a change in price is quite large in both cases. Overall, while our results do not entail a clear conclusion about the existence of menu costs, there is evidence of both time-dependent and state-dependent price setting behaviors by retailers.

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Paper provided by European Central Bank in its series Working Paper Series with number 384.

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Length: 74 pages
Date of creation: Aug 2004
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Handle: RePEc:ecb:ecbwps:20040384

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Related research
Keywords: Price stickiness; duration of prices; consumer price index; frequency of price change.;

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Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
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  2. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 349-89, April. [Downloadable!] (restricted)
  3. Mónica Dias & Daniel Dias & Pedro D. Neves, 2004. "Stylised features of price setting behaviour in Portugal: 1992 - 2001," Working Paper Series 332, European Central Bank. [Downloadable!]
  4. David Genesove, 2003. "The Nominal Rigidity of Apartment Rents," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 844-853, 09. [Downloadable!] (restricted)
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