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State-Dependent or Time-Dependent Pricing? New Evidence from a Monthly Firm-Level Survey: 1980 2017

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  • Dixon, Huw

    (Cardiff Business School)

  • Grimme, Christian

    (Leibniz Institute for Economic Research at the University of Munich and CESifo)

Abstract

We examine the relative importance of time and state dependence in the price-setting decisions of firms using a monthly panel of German firms over the period 1980 2017. We propose a re?ned version of time dependence by introducing di?erent hazard functions for price increases and decreases. We ?nd three sets of results. First, time dependence is much more important for price setting than what the previous literature has found. Second, price decreases can be well explained by time dependence alone. Price increases are best predicted by the interaction of time-dependent and ?rm-speci?c state factors. Third, time dependence for price increases and decreases look completely di?erent from each other. Our empirical results suggest that theoretical models should integrate both time and state dependence rather than developing the approaches separately.

Suggested Citation

  • Dixon, Huw & Grimme, Christian, 2021. "State-Dependent or Time-Dependent Pricing? New Evidence from a Monthly Firm-Level Survey: 1980 2017," Cardiff Economics Working Papers E2021/1, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2021/1
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    References listed on IDEAS

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    Cited by:

    1. Joshy Easaw & Christian Grimme, 2021. "The Impact of Aggregate Uncertainty on Firm-Level Uncertainty," CESifo Working Paper Series 8934, CESifo.

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    More about this item

    Keywords

    Survey Data; Price Setting; Extensive Margin; State-Dependent Pricing; Time-Dependent Pricing;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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