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The patterns and determinants of price setting in the Belgian industry

  • Cornille, David
  • Dossche, Maarten

This paper documents the patterns and determinants of price setting in the Belgian industry. We analyse the micro data underlying the Producer Price Index (PPI) over the period from February 2001 to January 2005. On average only one out of four prices changes in a typical month, whereas the absolute size of a price change amounts to 6%. The frequencies of price adjustment are particularly heterogeneous across sectors, which is determined by heterogeneity in the market and cost structure. We find no signs of downward nominal rigidity. A joint analysis of sizes and frequencies of price adjustment across time shows that price setting is characterised by both time- and state-dependent pricing. About 38% of the exported goods are a¤ected by pricing-to-market. JEL Classification: D40, E31

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Paper provided by European Central Bank in its series Working Paper Series with number 0618.

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Date of creation: May 2006
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Handle: RePEc:ecb:ecbwps:20060618
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  1. Peter J. Klenow & Oleksiy Kryvtsov, 2005. "State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?," NBER Working Papers 11043, National Bureau of Economic Research, Inc.
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  9. Álvarez, Luis J. & Dhyne, Emmanuel & Hoeberichts, Marco & Kwapil, Claudia & Le Bihan, Hervé & Lünnemann, Patrick & Martins, Fernando & Sabbatini, Roberto & Stahl, Harald & Vermeulen, Philip & Vilmunen, 2006. "Sticky prices in the euro area: a summary of new micro evidence," Discussion Paper Series 1: Economic Studies 2006,02, Deutsche Bundesbank, Research Centre.
  10. 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.
  11. D. Cornille & B. Robert, 2005. "Sectoral interdependences and cost structure in the Belgian economy : an application for input-output tables," Economic Review, National Bank of Belgium, issue ii, pages 33-48, June.
  12. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
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  19. repec:nbr:nberre:0126 is not listed on IDEAS
  20. Hoffmann, Johannes & Kurz-Kim, Jeong-Ryeol, 2006. "Consumer price adjustment under the microscope: Germany in a period of low inflation," Discussion Paper Series 1: Economic Studies 2006,16, Deutsche Bundesbank, Research Centre.
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  24. Martin Eichenbaum & Jonas D. M. Fisher, 2003. "Evaluating the Calvo model of sticky prices," Working Paper Series WP-03-23, Federal Reserve Bank of Chicago.
  25. 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.
  26. Mikhail Golosov & Robert E. Lucas, 2003. "Menu Costs and Phillips Curves," NBER Working Papers 10187, National Bureau of Economic Research, Inc.
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