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Price Setting Behaviour in Latvia: Descriptive Evidence from CPI Microdata

  • Konstantins Benkovskis

    (Bank of Latvia)

  • Ludmila Fadejeva

    (Bank of Latvia)

  • Krista Kalnberzina

    (Bank of Latvia)

The question of price stickiness remains one of the most important in macroeconomics, as price flexibility partly determines how long it takes for inflation and real economic variables to return to their potential levels after a shock. To get a better understanding of price change frequency and size, the empirical work on price stickiness based on microdata from surveys on prices of individual products from individual outlets is needed. The main goal of this study is to provide descriptive evidence on the degree of nominal rigidity of consumer prices in Latvia at aggregate and disaggregate levels. To achieve this goal, we use the micro database on consumer prices provided by the CSB. The main finding of the paper is that during 2003–2009 Latvia's consumer prices were flexible. The average duration of a price spell was 3.5 months, and every month on average 28.7% of consumer prices were changed.

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Paper provided by Latvijas Banka in its series Discussion Papers with number 2010/01.

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Date of creation: 09 Dec 2010
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Handle: RePEc:ltv:dpaper:201001
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  16. Fougère, Denis & Le Bihan, Hervé & Sevestre, Patrick, 2005. "Heterogeneity in consumer price stickiness: a microeconometric investigation," Working Paper Series 0536, European Central Bank.
  17. Daniel Kaufmann, 2009. "Price-Setting Behaviour in Switzerland: Evidence from CPI Micro Data," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 145(III), pages 293-349, September.
  18. Daniel Dias & Carlos Robalo Marques & J.M.C.Santos Silva, 2006. "Measuring the Importance of the Uniform Nonsynchronization Hypothesis," Working Papers w200603, Banco de Portugal, Economics and Research Department.
  19. Viktors Ajevskis & Kristine Vitola, 2009. "Advantages of Fixed Exchange Rate Regime from a General Equilibrium Perspective," Working Papers 2009/04, Latvijas Banka.
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  21. Aleksejs Melihovs & Anna Zasova, 2007. "Estimation of the Phillips Curve for Latvia," Working Papers 2007/03, Latvijas Banka.
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