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Heterogeneity in consumer price stickiness: a microeconometric investigation

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  • Fougère, Denis
  • Le Bihan, Hervé
  • Sevestre, Patrick

Abstract

This paper examines heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French CPI. To that end, we estimate, at a very high level of disaggregation, competing-risks duration models that distinguish between price increases, price decreases and product replacements. The main findings are the following: i ) cross-product and cross-outlet-type heterogeneity in both the shape of the hazard function and the impact of covariates is pervasive ii) at the product-outlet type level, the baseline hazard function of a price spell is non-decreasing iii ) there is strong evidence of state dependence, especially for price increases. JEL Classification: E31, C41

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0536.

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Date of creation: Oct 2005
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Handle: RePEc:ecb:ecbwps:20050536

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Keywords: duration models; hazard function; heterogeneity; sticky prices;

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