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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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  1. 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.
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  7. Kurri, Samu, 2007. "Price changes in Finland: some evidence from micro CPI data," Working Paper Series 0728, European Central Bank.
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  12. 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 Paper Research 74, National Bank of Belgium.
  13. 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.
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  18. repec:nbr:nberre:0126 is not listed on IDEAS
  19. 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, Oxford University Press, vol. 114(2), pages 655-690.
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