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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), 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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Abstract

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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Publisher Info
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 2005
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Handle: RePEc:onb:oenbwp:101

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Related research
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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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  10. Kashyap, Anil K, 1995. "Sticky Prices: New Evidence from Retail Catalogs," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 245-74, February. [Downloadable!] (restricted)
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  13. Mónica Dias & Daniel Dias & Pedro D. Neves, 2004. "Stylised features of price setting behaviour in Portugal: 1992 - 2001," Working Paper Series 332, European Central Bank. [Downloadable!]
  14. Laurent Baudry & Hervé Le Bihan & Patrick Sevestre & Sylvie Tarrieu, 2004. "Price rigidity. Evidence from the French CPI micro-data," Working Paper Series 384, European Central Bank. [Downloadable!]
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