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The Patterns and Determinants of Price Setting in the Belgian Industry

  • D. CORNILLE
  • M. DOSSCHE

    ()

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 found 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 affected by pricing to market.

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File URL: http://wps-feb.ugent.be/Papers/wp_06_386.pdf
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Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 06/386.

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Length: 41 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:rug:rugwps:06/386
Contact details of provider: Postal: Hoveniersberg 4, B-9000 Gent
Phone: ++ 32 (0) 9 264 34 61
Fax: ++ 32 (0) 9 264 35 92
Web page: http://www.ugent.be/eb

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  1. Bhaskar, V, 2002. "On Endogenously Staggered Prices," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 97-116, January.
  2. Benigno, Pierpaolo, 2001. "Optimal Monetary Policy in a Currency Area," CEPR Discussion Papers 2755, C.E.P.R. Discussion Papers.
  3. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & C. Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & R. Sabbatini & H. Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in The Euro Area: a Summary of New Micro Evidence," Working Papers w200605, Banco de Portugal, Economics and Research Department.
  4. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
  5. Ball, Laurence & Mankiw, N Gregory, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," Economic Journal, Royal Economic Society, vol. 104(423), pages 247-61, March.
  6. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 349-89, April.
  7. Robert Lucas & Mike Golosov, 2004. "Menu Costs and Phillips Curves," 2004 Meeting Papers 144, Society for Economic Dynamics.
  8. 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.
  9. 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.
  10. Hoffmann, Johannes & Kurz-Kim, Jeong-Ryeol, 2006. "Consumer price adjustment under the microscope: Germany in a period of low inflation," Working Paper Series 0652, European Central Bank.
  11. Luis J. �lvarez & Pablo Burriel & Ignacio Hernando, 2010. "Price-setting behaviour in Spain: evidence from micro PPI data," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 105-121.
  12. Daniel Levy & Georg Muller & Shantanu Dutta & Mark Bergen, 2002. "Holiday Price Rigidity and Cost of Price Adjustment," Emory Economics 0208, Department of Economics, Emory University (Atlanta).
  13. Baudry, L. & Le Bihan, H. & Sevestre, P. & Tarrieu, S., 2004. "Price Rigidity. Evidence from the French CPI Macro-Data," Working papers 113, Banque de France.
  14. Ignazio Angeloni & Luc Aucremanne & Michael Ehrmann & Jordi Galí & Andrew Levin & Frank Smets, 2005. "New Evidence on Inflation Persistence and Price Stickiness in the Euro Area: Implications for Macro Modelling," Working Papers 242, Barcelona Graduate School of Economics.
  15. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-58, September.
  16. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," NBER Working Papers 5809, National Bureau of Economic Research, Inc.
  17. repec:nbr:nberre:0126 is not listed on IDEAS
  18. Aucremanne, Luc & Dhyne, Emmanuel, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 0331, European Central Bank.
  19. Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April.
  20. Filippo Altissimo & Laurent Bilke & Andrew Levin & Thomas Mathä & Benoit Mojon, 2006. "Sectoral and Aggregate Inflation Dynamics in the Euro Area," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 585-593, 04-05.
  21. 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.
  22. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
  23. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  24. Jeanne, Olivier, 1998. "Generating real persistent effects of monetary shocks: How much nominal rigidity do we really need?," European Economic Review, Elsevier, vol. 42(6), pages 1009-1032, June.
  25. 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.
  26. 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.
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