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Firm-level uncertainty and output prices

Author

Listed:
  • Elena Mattevi

    (Bank of Italy)

  • Tullia Padellini

    (Bank of Italy)

Abstract

Based on the unique information provided by Banca d'Italia's Survey on Inflation and Growth Expectations, we develop an indicator of firm-level ex ante uncertainty on future business conditions and use it to estimate the relationship between uncertainty and the expected development of each firm's selling prices. We find evidence that price flexibility increases with uncertainty: firms facing uncertainty both show a higher propensity to introduce price changes in the following months (extensive margin) and to make larger price changes compared with the other firms (intensive margin). This evidence suggests that price stickiness may ease in times of high uncertainty.

Suggested Citation

  • Elena Mattevi & Tullia Padellini, 2025. "Firm-level uncertainty and output prices," Questioni di Economia e Finanza (Occasional Papers) 966, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_966_25
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    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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