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Price setting on the two sides of the Atlantic: evidence from supermarket-scanner data

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  • Karadi, Peter
  • Amann, Juergen
  • Bachiller, Javier Sánchez
  • Seiler, Pascal
  • Wursten, Jesse

Abstract

We compare supermarket price setting in the US and the euro area and assess its impact on food inflation. We introduce a novel scanner dataset of Germany, the Netherlands, France, and Italy (EA4) and contrast it with an equivalent dataset from the US. We find that both higher frequency and stronger state dependence of price changes contribute to higher flexibility of supermarket inflation in the US relative to the euro area. We argue that the driving force behind both factors is higher cross-sectional volatility in the US. Larger product-level fluctuations both force retailers to adjust prices more frequently and increase price misalignments, which increase the selection of large price changes. [...] JEL Classification: E31, E32, E52, F44

Suggested Citation

  • Karadi, Peter & Amann, Juergen & Bachiller, Javier Sánchez & Seiler, Pascal & Wursten, Jesse, 2023. "Price setting on the two sides of the Atlantic: evidence from supermarket-scanner data," Working Paper Series 2853, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20232853
    Note: 1871516
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    Cited by:

    1. Eduardo Gutiérrez Chacón & Pau Roldan Blanco, 2024. "The inflationary spike in Spain between 2021 and 2023: evidence from micro data," Economic Bulletin, Banco de España, issue 2024/Q1.
    2. Alberto Cavallo & Francesco Lippi & Ken Miyahara, 2024. "Large shocks travel fast," Working Papers 198, Peruvian Economic Association.
    3. Beck, Günter W. & Carstensen, Kai & Menz, Jan-Oliver & Schnorrenberger, Richard & Wieland, Elisabeth, 2023. "Nowcasting consumer price inflation using high-frequency scanner data: Evidence from Germany," Discussion Papers 34/2023, Deutsche Bundesbank.

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    More about this item

    Keywords

    COVID-19; duration hazard; food inflation; generalized hazard; state-dependent price setting; US and euro-area comparison;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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