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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. To that end, 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 in both the shape of the hazard function and the impact of covariates is pervasive 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. JEL Classification: E31, C41

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Paper provided by European Central Bank in its series Working Paper Series with number 0536.

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Date of creation: Oct 2005
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Handle: RePEc:ecb:ecbwps:20050536
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  1. Sheshinski, Eytan & Weiss, Yoram, 1983. "Optimum Pricing Policy under Stochastic Inflation," Review of Economic Studies, Wiley Blackwell, vol. 50(3), pages 513-29, July.
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  3. 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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  6. Philip Vermeulen & Daniel A. Dias & Maarten Dossche & Erwan Gautier & Ignacio Hernando & Roberto Sabbatini & Harald Stahl, 2012. "Price Setting in the Euro Area: Some Stylized Facts from Individual Producer Price Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(8), pages 1631-1650, December.
  7. Baudry, Laurent & Le Bihan, Hervé & Sevestre, Patrick & Tarrieu, Sylvie, 2004. "Price rigidity. Evidence from the French CPI micro-data," Working Paper Series 0384, European Central Bank.
  8. John B. Taylor, 1998. "Staggered Price and Wage Setting in Macroeconomics," NBER Working Papers 6754, National Bureau of Economic Research, Inc.
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  10. Álvarez, Luis J. & Hernando, Ignacio, 2004. "Price setting behaviour in Spain: stylised facts using consumer price micro data," Working Paper Series 0416, European Central Bank.
  11. repec:nbr:nberre:0126 is not listed on IDEAS
  12. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  13. Loupias, C. & Ricart, R., 2004. "Price Setting in France: new Evidence from Survey Data," Working papers 120, Banque de France.
  14. Silvia Fabiani & Martine Druant & Ignacio Hernando & Claudia Kwapil & Bettina Landau & Claire Loupias & Fernando Martins & Thomas Mathä & Roberto Sabbatini & Harald Stahl & Ad Stokman, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
  15. Dias, Daniel & Robalo Marques, Carlos & Santos Silva, João M. C., 2005. "Time or state dependent price setting rules? Evidence from Portuguese micro data," Working Paper Series 0511, European Central Bank.
  16. Rotemberg, Julio J, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 517-31, October.
  17. Luis J. Álvarez & Pablo Burriel & Ignacio Hernando, 2005. "Do decreasing hazard functions for price changes make any sense?," Banco de Espa�a Working Papers 0508, Banco de Espa�a.
  18. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  19. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  20. Patrick Lünnemann & Thomas Y. Mathä, 2010. "Consumer price behaviour: evidence from Luxembourg micro data," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 177-192.
  21. 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.
  22. 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 Papers w200506, Banco de Portugal, Economics and Research Department.
  23. 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.
  24. 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.
  25. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
  26. 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.
  27. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing And The General Equilibrium Dynamics Of Money And Output," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 655-690, May.
  28. 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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