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How frequently do consumer prices change in Austria? Evidence from micro CPI data

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Author Info
Josef Baumgartner () (Austrian Institute of Economic Research (WIFO), P.O. Box 91, 1103 Vienna, Austria.)
Ernst Glatzer () (Oesterreichische Nationalbank, Otto Wagner Platz 3, P.O. Box 61, 1010 Vienna,Austria.)
Fabio Rumler () (Oesterreichische Nationalbank, Otto Wagner Platz 3, P.O. Box 61, 1010 Vienna,Austria.)
Alfred Stiglbauer () (Oesterreichische Nationalbank, Otto Wagner Platz 3, P.O. Box 61, 1010 Vienna,Austria.)

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Abstract

Based on individual price records collected for the computation of the Austrian CPI, average frequencies of price changes and durations of price spells are estimated to characterize price setting in Austria. Depending on the estimation method, prices are unchanged for 10 to 14 months on average. We find strong heterogeneity across sectors and products. Price increases occur only slightly more often than price decreases. The typical size of a price increase (decrease) is 11 (15) percent. The aggregate hazard function of prices is decreasing with time. Besides heterogeneity across products and price setters, this is due to oversampling of products with a high frequency of price changes. Accounting for unobserved heterogeneity in estimating the probability of a price change with a fixed-effects logit model, we find a positive effect of the duration of a price spell. During the Euro cash changeover the probability of price changes was higher.

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Paper provided by European Central Bank in its series Working Paper Series with number 523.

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Length: 73 pages
Date of creation: Sep 2005
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Handle: RePEc:ecb:ecbwps:20050523

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Related research
Keywords: Consumer prices; sticky prices; frequency and synchronization of price changes; duration of price spells.;

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Find related papers by JEL classification:
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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