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The Price Setting Behavior in Colombia: Evidence from PPI Micro Data

  • Juan Manuel Julio

    ()

  • Héctor Manuel Zárate

    ()

In this paper we explore the price setting behavior of Colombian producers and importers using a unique database containing the monthly price reports underlying the Colombian PPI from Jun-1999 to Oct-2006. We focus on five particular questions: 1. Are prices sticky or flexible? 2. Is a price increase more likely than a decrease? 3. Are price changes synchronized? 4. Is the pricing rule state or time dependent? 5. Are price changes sizable? Answers to these questions provide some of the micro fundamentals for the design of monetary policy in this country.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 483.

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