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Price Behavior in an Inflationary Environment: Evidence from Supermarket Data

  • Carlos Felipe Jaramillo
  • Daniel Cerquera
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    This paper analyzes several important aspects of price behavior using disaggregated weekly data on prices of supermarket products in Colombia between 1991 and 1994. The analysis shows that despite hight and persistent rates of inflation in the economy, price quotations persist on average for two months. The large proportion of observations for which stores opt not to change prices highlight the importance of menu costs, even in an economy accustomed to persistent double-digit inflation. Despite the seemingly hight levels of rigidity, the degree of real price erosion found before prices change are lower than those found in other inflationary economies. Price declines are not uncommon, and downward rigidity does not seem to be an issue in the Colombian inflationary environment. Aggregate price changes are also found to exert an important effect on relative price variation at the aggregate and commodity level.

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    File URL: http://www.banrep.gov.co/docum/ftp/borra138.pdf
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    Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 138.

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    Handle: RePEc:bdr:borrec:138
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      • Driffill, John & Mizon, Grayham E. & Ulph, Alistair, 1990. "Costs of inflation," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 19, pages 1013-1066 Elsevier.
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    23. Simon Hall & Anthony Yates, 1998. "Are there downward nominal rigidities in product markets?," Bank of England working papers 80, Bank of England.
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