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How Frequently Do Consumer Prices Change in Austria? Evidence from Micro CPI Data

In this paper a data set with price records collected for the computation of the Austrian CPI is used to estimate the average frequency of price changes and the duration of price spells to provide empirical evidence on the degree and characteristics of price rigidity in Austria. Depending on the estimation method applied, on average, prices are unchanged for 10 to 14 months. We find a strong heterogeneity across sectors and products. Price increases occur only slightly more often than price decreases. For both cases the typical size of the weighted average price change is quite large (11 and 15 percent, respectively). Like in related contributions we find that the aggregate hazard function is decreasing with time. Apart from heterogeneity across products and price setters, this is due to oversampling of products with a high frequency of price changes. Accounting for the unobserved heterogeneity in estimating the probability of a price change with a panel logit model (with fixed elementary product effects), we find a small but positive effect of the duration of a price spell on the probability of a price change. We also find that during the Euro cash changeover period the probability of price changes was higher.

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Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 101.

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Length: 83
Date of creation: 25 Jul 2005
Date of revision:
Handle: RePEc:onb:oenbwp:101
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Order Information: Postal: Oesterreichische Nationalbank, Economic Studies Division, c/o Beate Hofbauer-Berlakovich, POB 61, A-1011 Vienna, Austria

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  1. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050 Elsevier.
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  9. Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
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  11. 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.
  12. Fisher, Timothy C. G. & Konieczny, Jerzy D., 2000. "Synchronization of price changes by multiproduct firms: evidence from Canadian newspaper prices," Economics Letters, Elsevier, vol. 68(3), pages 271-277, September.
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  14. Luigi Campiglio, 2002. "Issues in the measurement of price indices: a new measure of inflation," Departmental Working Papers 2002-09, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  15. Anil K. Kashyap, 1991. "Sticky prices: new evidence from retail catalogs," Working Paper Series, Macroeconomic Issues 91-26, Federal Reserve Bank of Chicago.
  16. Mario Cleves & William W. Gould & Roberto G. Gutierrez & Yulia Marchenko, 2010. "An Introduction to Survival Analysis Using Stata," Stata Press books, StataCorp LP, edition 3, number saus3, November.
  17. Lach, Saul & Tsiddon, Daniel, 1996. "Staggering and Synchronization in Price-Setting: Evidence from Multiproduct Firms," American Economic Review, American Economic Association, vol. 86(5), pages 1175-96, December.
  18. 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.
  19. 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.
  20. Dias, Mónica & Dias, Daniel & Neves, Pedro D., 2004. "Stylised features of price setting behaviour in Portugal: 1992-2001," Working Paper Series 0332, European Central Bank.
  21. Suvanto , Antti & Hukkinen , Juhana, 2004. "Stable price level and changing prices," Research Discussion Papers 28/2004, Bank of Finland.
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