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Heterogeneity in Consumer Price Stickiness: A Microeconometric Investigation

  • Fougère, Denis
  • Le Bihan, Hervé
  • Sevestre, Patrick

This paper examines heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French CPI. For that purpose, we estimate at a very high level of disaggregation competing-risks duration models that distinguish between price increases, price decreases and product replacements. The main findings are the following: i) cross-product and cross-outlet-type heterogeneity is pervasive, both in the shape of the hazard function and in the impact of covariates; ii) at the product-outlet type level, the baseline hazard function of a price spell is non-decreasing; iii) there is strong evidence of state dependence, especially for price increases.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5300.

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Date of creation: Oct 2005
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Handle: RePEc:cpr:ceprdp:5300
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  1. Baumgartner, Josef & Glatzer, Ernst & Rumler, Fabio & Stiglbauer, Alfred, 2005. "How frequently do consumer prices change in Austria? Evidence from micro CPI data," Working Paper Series 0523, European Central Bank.
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  9. Veronese, Giovanni & Fabiani, Silvia & Gattulli, Angela & Sabbatini, Roberto, 2005. "Consumer price behaviour in Italy: evidence from micro CPI data," Working Paper Series 0449, European Central Bank.
  10. 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.
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  14. Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April.
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  19. Julio Rotemberg, 1987. "The New Keynesian Microfoundations," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 69-116 National Bureau of Economic Research, Inc.
  20. Alexander L. Wolman, 1999. "Sticky prices, marginal cost, and the behavior of inflation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 29-48.
  21. Lünnemann, Patrick & Mathä, Thomas Y., 2005. "Consumer price behaviour in Luxembourg: evidence from micro CPI data," Working Paper Series 0541, European Central Bank.
  22. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 517-531.
  23. Loupias, Claire & Ricart, Roland, 2004. "Price setting in France: new evidence from survey data," Working Paper Series 0423, European Central Bank.
  24. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
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