Survey of Price-Setting Behaviour of Canadian Companies
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.
|Date of creation:||2006|
|Date of revision:|
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- 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).
- Apel, Mikael & Friberg, Richard & Hallsten, Kerstin, 2005. "Microfoundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 313-38, April.
- Ball, Laurence & Romer, David, 1991.
"Sticky Prices as Coordination Failure,"
American Economic Review,
American Economic Association, vol. 81(3), pages 539-52, June.
- 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.
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