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How Frequently Do Consumer Prices Change in Austria? Evidence from Micro CPI Data Author info | Abstract | Publisher info | Download info | Related research | Statistics Josef Baumgartner () (Austrian Institute of Economic Research (WIFO), Arsenal Objekt 20, POB 91, 1103 Vienna, Austria )
Ernst Glatzer () (Oesterreichische Nationalbank, Economic Analysis Division, Otto-Wagner-Platz 3, POB 61, 1011 Vienna, Austria )
Fabio Rumler () (Oesterreichische Nationalbank, Economic Analysis Division, Otto-Wagner-Platz 3, POB 61, 1011 Vienna, Austria )
Alfred Stiglbauer () (Oesterreichische Nationalbank, Economic Analysis Division, Otto-Wagner-Platz 3, POB 61, 1011 Vienna, Austria )
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In this paper a data set with price records collected for the computation of the Austrian CPI is used to estimate the average frequency of price changes and the duration of price spells to provide empirical evidence on the degree and characteristics of price rigidity in Austria. Depending on the estimation method applied, on average, prices are unchanged for 10 to 14 months. We find a strong heterogeneity across sectors and products. Price increases occur only slightly more often than price decreases. For both cases the typical size of the weighted average price change is quite large (11 and 15 percent, respectively). Like in related contributions we find that the aggregate hazard function is decreasing with time. Apart from heterogeneity across products and price setters, this is due to oversampling of products with a high frequency of price changes. Accounting for the unobserved heterogeneity in estimating the probability of a price change with a panel logit model (with fixed elementary product effects), we find a small but positive effect of the duration of a price spell on the probability of a price change. We also find that during the Euro cash changeover period the probability of price changes was higher.
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Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number
101.
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Length: 83 pages
Date of creation: 25 Jul 2005Date of revision:
Handle: RePEc:onb:oenbwp:101Contact details of provider: Postal: P.O. Box 61, A-1011 Vienna, Austria Phone: +43/1/404 20 7205 Fax: +43/1/404 20 7299 Email: Web page: http://www.oenb.at/ More information through EDIRC
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Keywords: Consumer prices sticky prices frequency and synchronization of price changes duration of price spells Other versions of this item:
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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