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Costs, Demand, and Producer Price Changes

Author

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  • Claire Loupias

    (Université d'Evry-Val-d'Essonne, EPEE, TEPP (FR-CNRS3126))

  • Patrick Sevestre

    (Banque de France, SAMIC-DEMS-DGEI, and Paris School of Economics, Université de Paris I–Panthéon Sorbonne)

Abstract

Using business survey data, we estimate an ordered probit model to explain the occurrence of producer price increases and decreases in the French manufacturing industry. Our results show that changes in intermediate input prices are the main driver of producer price changes. Changes in firms' labor costs, their production level, or the producer price index of their industry contribute less to the occurrence of price changes. Moreover, when they face a change in their costs, firms adjust their prices upward more often and more rapidly than they do it downward, especially when the shock is perceived as permanent. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Claire Loupias & Patrick Sevestre, 2013. "Costs, Demand, and Producer Price Changes," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 315-327, March.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:1:p:315-327
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    More about this item

    Keywords

    price stickiness; frequency of price changes; price setting-behavior; survey data; ordered probit model;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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