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Consumer Price Setting In Italy

  • Silvia Fabiani

    ()

    (BANK OF ITALY)

  • Angela Gattulli

    ()

    (BANK OF ITALY)

  • Roberto Sabbatini

    ()

    (BANK OF ITALY)

  • Giovanni Veronese

    ()

    (BANK OF ITALY)

This paper investigates the microeconomic behaviour of consumer prices in Italy using the individual price records underlying the Italian CPI dataset collected by Istat. We discuss how to analyse price stickiness using such a detailed database and compute a quantitative measure of the unconditional degree of price rigidity in the Italian economy. The analysis focuses on the monthly frequency of price changes and on the duration of price spells, with a sectoral breakdown as well as with a classification by type of outlet. Prices are in general found to be rather sticky, remaining unchanged on average for around 10 months; price spells last longer for non-energy industrial goods and services, much less for energy products. Prices are revised more frequently upwards than downwards, while the size of price changes is quite symmetric. Price st ickiness is found to be less marked in large modern stores than in smaller traditional shops. Price changes display considerable synchronisation, in particular in the services sector. The average frequency of price changes and the probability of observing a price change over time and across items are positively related to headline inflation and increases in VAT rates and negatively related to the share of attractive prices. These findings are consistent with the ones reported in similar national studies for other countries of the euro area, which were conducted by the National Central Banks within the Eurosystem Inflation Persistence Network.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 556.

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Date of creation: Jun 2005
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Handle: RePEc:bdi:wptemi:td_556_05
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Web page: http://www.bancaditalia.it
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