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Price Setting Behaviour in Latvia: Descriptive Evidence from CPI Microdata

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  • Konstantins Benkovskis
  • Ludmila Fadejeva
  • Krista Kalnberzina

Abstract

The question of price stickiness remains one of the most important in macroeconomics, as price flexibility partly determines how long it takes for inflation and real economic variables to return to their potential levels after a shock. To get a better understanding of price change frequency and size, the empirical work on price stickiness based on microdata from surveys on prices of individual products from individual outlets is needed. The main goal of this study is to provide descriptive evidence on the degree of nominal rigidity of consumer prices in Latvia at aggregate and disaggregate levels. To achieve this goal, we use the micro database on consumer prices provided by the CSB. The main finding of the paper is that during 2003–2009 Latvia's consumer prices were flexible. The average duration of a price spell was 3.5 months, and every month on average 28.7% of consumer prices were changed.

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Bibliographic Info

Paper provided by Latvijas Banka in its series Discussion Papers with number 2010/01.

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Date of creation: 09 Dec 2010
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Handle: RePEc:ltv:dpaper:201001

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Keywords: price setting behaviour; Latvia's consumer prices; frequency of price change; duration; size of price change; sales; time-dependent pricing; state-dependent pricing;

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References

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Cited by:
  1. Konstantins Benkovskis & Ludmila Fadejeva, 2013. "VAT Rate Effect on Price Setting Behaviour in Latvia: Evidence from CPI Micro Data," Working Papers 2013/01, Latvijas Banka.
  2. Konstantins Benkovskis & Ludmila Fadejeva & Krista Kalnberzina, 2011. "Price Setting Behaviour in Latvia: Econometric Evidence from CPI Microdata," Working Papers 2011/01, Latvijas Banka.

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