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How do Individual UK Producer Prices Behave?

  • Philip Bunn
  • Colin Ellis

This paper examines the behaviour of individual producer prices in the United Kingdom, and uncovers a number of stylised facts about pricing behaviour. First, on average 26% of producer prices change each month, although there is considerable heterogeneity between sectors and price changes occur less frequently when measured by the average for individual products. Second, the probability of price changes is not constant over time: prices are most likely to change one, four and twelve months after they were previously set. Third, the distribution of price changes is wide, although a significant number of changes are relatively small and close to zero. Fourth, prices that change more frequently tend to do so by less. And fifth, price changes are much less persistent at the disaggregated level than aggregate inflation data imply. We find that conventional pricing theories struggle to match these results, particularly the marked heterogeneity.

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File URL: http://hdl.handle.net/10.1111/j.1468-0297.2011.02489.x
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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 122 (2012)
Issue (Month): 558 (02)
Pages: F16-F34

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Handle: RePEc:ecj:econjl:v:122:y:2012:i:558:p:f16-f34
DOI: j.1468-0297.2011.02489.x
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  1. 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," Working Papers 0703, Banco de España;Working Papers Homepage.
  2. Bunn, Philip & Ellis, Colin, 2010. "How do individual UK producer prices behave?," Bank of England working papers 394, Bank of England.
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