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Price Rigidity. Evidence from the French CPI Macro-Data

  • Baudry, L.
  • Le Bihan, H.
  • Sevestre, P.
  • Tarrieu, S.

Based upon a large fraction of the price records used for computing the French CPI, we document consumer price rigidity in France. We first provide a methodological discussion of issues involved in estimating average price duration with micro-data. The average duration of prices in the sectors covered by the database (65% of CPI) is then found to be around 8 months. A strong heterogeneity across sectors both in the average duration of prices and in the pattern of price setting is reported. There is no clear evidence of downward nominal rigidity, since price cuts are almost as frequent as price rises. Moreover, the average size of a change in price is quite large in both cases. Overall, while our results do not entail a clear conclusion about the existence of menu costs, there is evidence of both time-dependent and state-dependent price setting behaviors by retailers.

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Paper provided by Banque de France in its series Working papers with number 113.

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Length: 71 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:bfr:banfra:113
Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
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  1. 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.
  2. Dias, Mónica & Dias, Daniel & Neves, Pedro D., 2004. "Stylised features of price setting behaviour in Portugal: 1992-2001," Working Paper Series 0332, European Central Bank.
  3. Alexander L. Wolman, 2000. "The frequency and costs of individual price adjustments," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-22.
  4. David Genesove, 2003. "The Nominal Rigidity of Apartment Rents," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 844-853, November.
  5. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 349-89, April.
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