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R(a)ising Prices While Struggling: Firms Financial Constraints and Price Setting

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  • Nicoletta Berardi

Abstract

Working Paper Series no. 942. This paper investigates the interaction between financial constraints faced by firms and their price setting behaviour. We find systematic differences in the frequencies of price increases and decreases between financially constrained and unconstrained firms, consistently across several alternative proxies. Financial constraints affect price adjustments asymmetrically. When firms are financially struggling, they are more likely to increase their prices, while simultaneously exhibiting greater rigidity in lowering prices.

Suggested Citation

  • Nicoletta Berardi, 2024. "R(a)ising Prices While Struggling: Firms Financial Constraints and Price Setting," Working papers 942, Banque de France.
    • Handle: RePEc:bfr:banfra:942
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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