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Survey of Price-Setting Behaviour of Canadian Companies

  • David Amirault
  • Carolyn Kwan
  • Gordon Wilkinson
Registered author(s):

    In many mainstream macroeconomic models, sticky prices play an important role in explaining the effects of monetary policy on the economy. Various theories have been set forth to explain why prices are sticky. This study takes a firm-level survey approach, in a spirit similar to Blinder et al. (1998), to shed some light on the question of why prices are sticky. In particular, the Bank of Canada's regional offices surveyed 170 Canadian firms for their views on price dynamics. The authors find that the most important motivators of price changes are price changes by competitors, changes in domestic input costs, and changes in demand. Surprisingly, but consistent with the results reported in Bils and Klenow (2002), the survey evidence suggests that more than 50 per cent of firms change their prices more than four times a year. Moreover, the survey indicates that prices change more frequently than they did ten years ago, because of more intense competition and advances in information technology.

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    File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/02/wp06-35.pdf
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    Paper provided by Bank of Canada in its series Working Papers with number 06-35.

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    Length: 65 pages
    Date of creation: 2006
    Date of revision:
    Handle: RePEc:bca:bocawp:06-35
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    Web page: http://www.bank-banque-canada.ca/

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    1. Laurence Ball & David Romer, 1987. "Sticky Prices as Coordination Failure," NBER Working Papers 2327, National Bureau of Economic Research, Inc.
    2. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
    3. Apel, Mikael & Friberg, Richard & Hallsten, Kerstin, 2001. "Micro Foundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms," Working Paper Series 128, Sveriges Riksbank (Central Bank of Sweden).
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