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The Patterns and Determinants of Price Setting in the Belgian Industry

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Author Info
D. CORNILLE
M. DOSSCHE ()

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Abstract

This paper documents the patterns and determinants of price setting in the Belgian industry. We analyse the micro data underlying the Producer Price Index (PPI) over the period from February 2001 to January 2005. On average only one out of four prices changes in a typical month, whereas the absolute size of a price change amounts to 6%. The frequencies of price adjustment are particularly heterogeneous across sectors, which is determined by heterogeneity in the market and cost structure. We found no signs of downward nominal rigidity. A joint analysis of sizes and frequencies of price adjustment across time shows that price setting is characterised by both time and state dependent pricing. About 38% of the exported goods are affected by pricing to market.

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Publisher Info
Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 06/386.

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Length: 41 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:rug:rugwps:06/386

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Related research
Keywords: producer price setting; nominal price rigidity; pricing to market; time dependent pricing; state dependent pricing; staggering;

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Find related papers by JEL classification:
D40 - Microeconomics - - Market Structure and Pricing - - - General
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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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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  2. Ignazio Angelloni & Luc Aucremanne & Michael Ehrmann & Jordi Galí & Andrew Levin & Frank Smets, 2005. "New Evidence on Inflation Persistence and Price Stickiness in the Euro Area: Implications for Macro Modelling," Economics Working Papers 910, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  3. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
    Other versions:
  4. Johannes Hoffmann & Jeong-Ryeol Kurz-Kim, 2006. "Consumer price adjustment under the microscope - Germany in a period of low inflation," Working Paper Series 652, European Central Bank. [Downloadable!]
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  5. Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April. [Downloadable!] (restricted)
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  7. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
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  8. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May. [Downloadable!] (restricted)
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  10. Filippo Altissimo & Laurent Bilke & Andrew Levin & Thomas Mathä & Benoit Mojon, 2006. "Sectoral and Aggregate Inflation Dynamics in the Euro Area," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 585-593, 04-05. [Downloadable!] (restricted)
  11. Martin Eichenbaum & Jonas D.M. Fisher, 2004. "Evaluating the Calvo Model of Sticky Prices," NBER Working Papers 10617, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Philip Vermeulen & Daniel Dias & Maarten Dossche & Erwan Gautier & Ignacio Hernando & Roberto Sabbatini & Harald Stahl, 2007. "Price setting in the euro area : some stylised facts from individual producer price data," Research series 200703-30, National Bank of Belgium. [Downloadable!]
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  13. Luis J. Álvarez & Pablo Burriel & Ignacio Hernando, 2005. "Price setting behaviour in Spain: evidence from micro PPI data," Working Paper Series 522, European Central Bank. [Downloadable!]
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  14. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February. [Downloadable!] (restricted)
  15. Bhaskar, V, 2002. "On Endogenously Staggered Prices," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 97-116, January.
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  16. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 349-89, April. [Downloadable!] (restricted)
  17. Luc Aucremanne & Martine Druant, 2005. "Price-setting behaviour in Belgium: what can be learned from an ad hoc survey ?," Research series 200503-1, National Bank of Belgium. [Downloadable!]
  18. Laurence Ball & N. Gregory Mankiw, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," NBER Working Papers 4089, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. Emmanuel Dhyne & Jerzy Konieczny, 2007. "Temporal Distribution of Price Changes : Staggering in the Large and Synchronization in the Small," Research series 200706-02, National Bank of Belgium. [Downloadable!]
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  20. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
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  22. Benigno, Pierpaolo, 2004. "Optimal monetary policy in a currency area," Journal of International Economics, Elsevier, vol. 63(2), pages 293-320, July. [Downloadable!] (restricted)
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  23. Ãlvarez, Luís & Dhyne, Emmanuel & Hoeberichts, Marco & Kwapil, Claudia & Le Bihan, Hervé & Lünnemann, Patrick & Martins, Fernando & Sabbatini, Roberto & Stahl, Harald & Vermeulen, Philip & V, 2006. "Sticky prices in the euro area: a summary of new micro evidence," Discussion Paper Series 1: Economic Studies 2006,02, Deutsche Bundesbank, Research Centre. [Downloadable!]
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  24. 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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  25. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-58, September. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, 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.)

  1. Emmanuel Dhyne & Catherine Fuss & Hashem Pesaran & Patrick Sevestre, 2006. "Lumpy price adjustments : a microeconometric analysis," Research series 200610-12, National Bank of Belgium. [Downloadable!]
    Other versions:
  2. Dias, D. & Dossche, M. & Gautier, E. & Hernando, I. & Sabbatini , R. & Stahl , H. & Vermeulen, P., 2007. "Macro Price setting in the euro area: Some stylised facts from Individual Producer Price," Documents de Travail 164, Banque de France. [Downloadable!]
  3. Luis J. Álvarez, 2007. "What do micro price data tell us on the validity of the New Keynesian Phillips Curve?," Banco de España Working Papers 0728, Banco de España. [Downloadable!]
    Other versions:
  4. Gautier, E., 2008. "Les ajustements microéconomiques des prix : une synthèse des modèles théoriques et résultats empiriques," Documents de Travail 211, Banque de France. [Downloadable!]
  5. Vermeulen, Philip & Gautier, Erwan & Stahl, Harald & Dossche, Maarten & Sabbatini, Roberto & Dias, Daniel & Hernando, Ignacio, 2007. "Price setting in the euro area: some stylised facts from individual producer price data," Discussion Paper Series 1: Economic Studies 2007,03, Deutsche Bundesbank, Research Centre. [Downloadable!]
    Other versions:
  6. Erwan Gautier, 2008. "The behaviour of producer prices: evidence from French PPI micro data," Empirical Economics, Springer, vol. 35(2), pages 301-332, September. [Downloadable!] (restricted)
  7. Katja Funke & Christiane Nickel, 2006. "Does fiscal policy matter for the trade account? A panel cointegration study," Working Paper Series 620, European Central Bank. [Downloadable!]
  8. Annette Kamps, 2006. "The euro as invoicing currency in international trade," Working Paper Series 665, European Central Bank. [Downloadable!]
  9. Paolo Vitale, 2006. "A market microstructure analysis of foreign exchange intervention," Working Paper Series 629, European Central Bank. [Downloadable!]
    Other versions:
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