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Price rigidity. Evidence from the French CPI micro-data

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  • Sevestre, Patrick
  • Baudry, Laurent
  • Le Bihan, Hervé
  • Tarrieu, Sylvie

Abstract

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. JEL Classification: E31, D43, L11

Suggested Citation

  • Sevestre, Patrick & Baudry, Laurent & Le Bihan, Hervé & Tarrieu, Sylvie, 2004. "Price rigidity. Evidence from the French CPI micro-data," Working Paper Series 384, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:2004384
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    References listed on IDEAS

    as
    1. Dias, Mónica & Dias, Daniel & Neves, Pedro D., 2004. "Stylised features of price setting behaviour in Portugal: 1992-2001," Working Paper Series 332, European Central Bank.
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    5. David Genesove, 2003. "The Nominal Rigidity of Apartment Rents," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 844-853, November.
    6. Alexander L. Wolman, 2007. "The frequency and costs of individual price adjustment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(6), pages 531-552.
    7. Mónica Costa Dias & Daniel Dias & Pedro Duarte Neves, 2008. "Stylised features of consumer price setting behaviour in Portugal: 1992–2001," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 7(2), pages 75-99, August.
    8. Aucremanne, Luc & Dhyne, Emmanuel, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 331, European Central Bank.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    consumer price index; duration of prices; frequency of price change; price stickiness;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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