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An Emprical Analysis of Price Setting Behaviour in the Netherlands in the Period 1998-2003 Using Micro Data

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  • Nicole Jonker
  • Carsten Folkertsma
  • Harry Blijenberg

Abstract

In this paper we examine pricing behaviour of retail firms in the Netherlands during 1998-2003 using alarge database with monthly price quotes of 49 articles, representing different product types. We have conducted this study in order to gain in sight in the degree of nominal rigidity of consumer prices in the Dutch economy. We find that energy prices and prices of unprocessed food are most flexible, whereas prices of services are stickiest. Our sample contains not only ample evidence of upward but also of downward flexible prices. A multivariate analysis shows that firm size matters with prices being stickiest in small retail firms and most flexible in large retail firms and in the smallest retail firms consisting of the owners only. Furthermore, we investigate pass-through effects of VAT changes in product prices. We find that VAT increases are almost completely passed on to consumers. Finally, there is some evidence indicating that, after controlling for inflation, pricing behaviour of retail firms was different during the introduction of the euro than in the period directly preceding it.

Suggested Citation

  • Nicole Jonker & Carsten Folkertsma & Harry Blijenberg, 2004. "An Emprical Analysis of Price Setting Behaviour in the Netherlands in the Period 1998-2003 Using Micro Data," DNB Working Papers 019, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:019
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    References listed on IDEAS

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    1. Hall, Simon & Walsh, Mark & Yates, Anthony, 2000. "Are UK Companies' Prices Sticky?," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 425-446, July.
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    4. Luc Aucremanne & Emmanuel Dhyne, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Research 44, National Bank of Belgium.
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    8. 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.
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    Cited by:

    1. Emmanuel Dhyne & Luis J. Álvarez & Hervé Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lünnemann & Fabio Rumler & Jouko Vilmunen, 2005. "Price setting in the euro area: Some stylized facts from Individual Consumer Price Data," Working Paper Research 74, National Bank of Belgium.
    2. Filippo Altissimo & Michael Ehrmann & Frank Smets, 2006. "Inflation persistence and price-setting behaviour in the euro area – a summary of the IPN evidence," Occasional Paper Series 46, European Central Bank.
    3. Emi Nakamura & Jón Steinsson, 2010. "Monetary Non-neutrality in a Multisector Menu Cost Model," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 961-1013.
    4. Thomas A. Eife, 2008. "Do Menu Costs Make Prices Sticky?," Working Papers 0477, University of Heidelberg, Department of Economics, revised Oct 2008.
    5. Silvia Fabiani & Angela Gattulli & Roberto Sabbatini & Giovanni Veronese, 2006. "Consumer Price Setting in Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 65(1), pages 31-74, May.
    6. Filippo Altissimo & Michael Ehrmann & Frank Smets, 2006. "Inflation persistence and price-setting behaviour in the euro area : a summary of the Inflation Persistence Network evidence," Working Paper Research 95, National Bank of Belgium.
    7. repec:pri:cepsud:193goldberg is not listed on IDEAS
    8. Alvarez González, Luis Julián, 2008. "What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-36.
    9. Luc Aucremanne & Emmanuel Dhyne, 2005. "Time-dependent versus State-dependent Pricing: A Panel Data Approach to the Determinants of Belgian Consumer Price Changes," Working Paper Research 66, National Bank of Belgium.
    10. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
    11. Rafael Portillo & Luis-Felipe Zanna & Stephen O’Connell & Richard Peck, 2016. "Implications of food subsistence for monetary policy and inflation," Oxford Economic Papers, Oxford University Press, vol. 68(3), pages 782-810.
    12. E. Dhyne, 2005. "Inflation persistence and price-setting in the euro area : results of the Eurosystem Inflation Persistence Network," Economic Review, National Bank of Belgium, issue iv, pages 17-37, December.
    13. J. Konieczny, A. Skrzpacz, 2006. "Search, Costly Price Adjustment and the Frequency of Price Changes - Theory and Evidence," Working Papers eg0054, Wilfrid Laurier University, Department of Economics, revised 2006.
    14. 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 523, European Central Bank.
    15. Pinelopi K. Goldberg & Rebecca Hellerstein, 2009. "How rigid are producer prices?," Staff Reports 407, Federal Reserve Bank of New York.
    16. Bunn, Philip & Ellis, Colin, 2011. "How do individual UK consumer prices behave?," Bank of England working papers 438, Bank of England.
    17. Klenow, Peter J. & Malin, Benjamin A., 2010. "Microeconomic Evidence on Price-Setting," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 6, pages 231-284 Elsevier.
    18. Luc Aucremanne & Emmanuel Dhyne, 2005. "Time-dependent versus State-dependent Pricing: A Panel Data Approach to the Determinants of Belgian Consumer Price Changes," Working Paper Research 66, National Bank of Belgium.
    19. Gabriele Galati & William R. Melick, 2006. "The evolving inflation process: an overview," BIS Working Papers 196, Bank for International Settlements.
    20. Lünnemann, Patrick & Mathä, Thomas Y., 2005. "Consumer price behaviour in Luxembourg: evidence from micro CPI data," Working Paper Series 541, European Central Bank.
    21. Emmanuel Dhyne & Jerzy Konieczny & Fabio Rumler & Patrick Sevestre, 2009. "Price rigidity in the euro area - An assessment," European Economy - Economic Papers 2008 - 2015 380, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    22. repec:onb:oenbwp:y::i:101:b:1 is not listed on IDEAS

    More about this item

    Keywords

    nominal rigidity of prices; frequency of price change; Cox regression;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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