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The Price-Setting Behavior of Austrian Firms: Some Survey Evidence

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Abstract

This paper explores the price-setting behavior of Austrian firms based on survey evidence. Our main result is that customer relationships are a major source of price stickiness in the Austrian economy. We also find that the majority of firms in our sample follows a timedependent pricing strategy. However, a substantial fraction of firms deviates from time-dependent pricing in the case of large shocks and switches to a state-dependent pricing strategy. In addition, we present evidence suggesting that the price response to various shocks is subject to asymmetries.

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Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 100.

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Date of creation: 11 Jul 2005
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Handle: RePEc:onb:oenbwp:100

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Keywords: Price-setting behavior; Price rigidity;

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  1. Apel, Mikael & Friberg, Richard & Hallsten, Kerstin, 2005. "Microfoundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 313-38, April.
  2. Blinder, Alan S, 1991. "Why Are Prices Sticky? Preliminary Results from an Interview Study," American Economic Review, American Economic Association, vol. 81(2), pages 89-96, May.
  3. Olivier J. Blanchard, 1985. "The Wage Price Spiral," NBER Working Papers 1771, National Bureau of Economic Research, Inc.
  4. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
  5. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  6. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 529-38, May.
  7. Stiglitz, Joseph E, 1984. "Price Rigidities and Market Structure," American Economic Review, American Economic Association, vol. 74(2), pages 350-55, May.
  8. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  9. Anil K. Kashyap, 1991. "Sticky prices: new evidence from retail catalogs," Working Paper Series, Macroeconomic Issues 91-26, Federal Reserve Bank of Chicago.
  10. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  11. Laurence Ball & N. Gregory Mankiw, 1994. "A sticky-price manifesto," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
  12. Akerlof, George A & Yellen, Janet L, 1985. "A Near-rational Model of the Business Cycle, with Wage and Price Intertia," The Quarterly Journal of Economics, MIT Press, vol. 100(5), pages 823-38, Supp..
  13. L. Aucremanne & M. Druant, 2004. "Price-setting behaviour in Belgium : what can be learned from an ad hoc survey ?," Economic Review, National Bank of Belgium, issue IV, pages 17-47, December.
  14. Olivier J. Blanchard, 1982. "Price Asynchronization and Price Level Inertia," NBER Working Papers 0900, National Bureau of Economic Research, Inc.
  15. Julio J. Rotemberg, 2002. "Customer Anger at Price Increases, Time Variation in the Frequency of Price Changes and Monetary Policy," NBER Working Papers 9320, National Bureau of Economic Research, Inc.
  16. Barro, Robert J, 1972. "A Theory of Monopolistic Price Adjustment," Review of Economic Studies, Wiley Blackwell, vol. 39(1), pages 17-26, January.
  17. Loupias, Claire & Ricart, Roland, 2004. "Price setting in France: new evidence from survey data," Working Paper Series 0423, European Central Bank.
  18. Simon Hall & Mark Walsh & Anthony Yates, 1997. "How do UK companies set prices?," Bank of England working papers 67, Bank of England.
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