IDEAS home Printed from https://ideas.repec.org/p/bdi/wptemi/td_556_05.html
   My bibliography  Save this paper

Consumer Price Setting In Italy

Author

Listed:
  • Silvia Fabiani

    (BANK OF ITALY)

  • Angela Gattulli

    (BANK OF ITALY)

  • Roberto Sabbatini

    (BANK OF ITALY)

  • Giovanni Veronese

    (BANK OF ITALY)

Abstract

This paper investigates the microeconomic behaviour of consumer prices in Italy using the individual price records underlying the Italian CPI dataset collected by Istat. We discuss how to analyse price stickiness using such a detailed database and compute a quantitative measure of the unconditional degree of price rigidity in the Italian economy. The analysis focuses on the monthly frequency of price changes and on the duration of price spells, with a sectoral breakdown as well as with a classification by type of outlet. Prices are in general found to be rather sticky, remaining unchanged on average for around 10 months; price spells last longer for non-energy industrial goods and services, much less for energy products. Prices are revised more frequently upwards than downwards, while the size of price changes is quite symmetric. Price st ickiness is found to be less marked in large modern stores than in smaller traditional shops. Price changes display considerable synchronisation, in particular in the services sector. The average frequency of price changes and the probability of observing a price change over time and across items are positively related to headline inflation and increases in VAT rates and negatively related to the share of attractive prices. These findings are consistent with the ones reported in similar national studies for other countries of the euro area, which were conducted by the National Central Banks within the Eurosystem Inflation Persistence Network.

Suggested Citation

  • Silvia Fabiani & Angela Gattulli & Roberto Sabbatini & Giovanni Veronese, 2005. "Consumer Price Setting In Italy," Temi di discussione (Economic working papers) 556, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_556_05
    as

    Download full text from publisher

    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2005/2005-0556/tema_556.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Peter J. Klenow & Oleksiy Kryvtsov, 2008. "State-Dependent or Time-Dependent Pricing: Does it Matter for Recent U.S. Inflation?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(3), pages 863-904.
    2. Hall, Simon & Walsh, Mark & Yates, Anthony, 2000. "Are UK Companies' Prices Sticky?," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 425-446, July.
    3. 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.
    4. 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.
    5. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    6. Anil K Kashyap, 1995. "Sticky Prices: New Evidence from Retail Catalogs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 245-274.
    7. Cubadda, G. & Sabbatini, R., 1997. "The Seasonality of the Italian Cost-of-Living Index," Papers 313, Banca Italia - Servizio di Studi.
    8. Gali, Jordi & Gertler, Mark & Lopez-Salido, J. David, 2001. "European inflation dynamics," European Economic Review, Elsevier, vol. 45(7), pages 1237-1270.
    9. 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 1175-1196, December.
    10. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-679, June.
    11. Marvin Goodfriend & Robert G. King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296, National Bureau of Economic Research, Inc.
    12. Aucremanne, Luc & Dhyne, Emmanuel, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 331, European Central Bank.
    13. Hernando, Ignacio & Álvarez, Luis J., 2004. "Price setting behaviour in Spain: stylised facts using consumer price micro data," Working Paper Series 416, European Central Bank.
    14. Jonker, Nicole & Folkertsma, Carsten & Blijenberg, Harry, 2004. "An empirical analysis of price setting behaviour in the Netherlands in the period 1998-2003 using micro data," Working Paper Series 413, European Central Bank.
    15. Ignazio Angeloni & Luc Aucremanne & Michael Ehrmann & Jordi Galí & Andrew Levin & Frank Smets, 2006. "New Evidence on Inflation Persistence and Price Stickiness in the Euro Area: Implications for Macro Modeling," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 562-574, 04-05.
    16. Dias, Mónica & Dias, Daniel & Neves, Pedro, 2004. "Stylised features of price setting behaviour in Portugal: 1992-2001," Working Paper Series 332, European Central Bank.
    17. 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.
    18. Silvia Fabiani & Angela Gattulli & Roberto Sabbatini, 2003. "La rigidità dei prezzi in Italia," Moneta e Credito, Economia civile, vol. 56(223), pages 325-358.
    19. Luis J. Álvarez & 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.
    20. 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 349-389, April.
    21. Ball, Laurence & Mankiw, N Gregory, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," Economic Journal, Royal Economic Society, vol. 104(423), pages 247-261, March.
    22. Eyal Baharad & Benjamin Eden, 2004. "Price Rigidity and Price Dispersion: Evidence from Micro Data," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 613-641, July.
    23. Konieczny, Jerzy D. & Skrzypacz, Andrzej, 2005. "Inflation and price setting in a natural experiment," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 621-632, April.
    24. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1.
    25. Benigno, Pierpaolo, 2004. "Optimal monetary policy in a currency area," Journal of International Economics, Elsevier, vol. 63(2), pages 293-320, July.
    26. Alexander L. Wolman, 1999. "Sticky prices, marginal cost, and the behavior of inflation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 29-48.
    27. David Genesove, 2003. "The Nominal Rigidity of Apartment Rents," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 844-853, November.
    28. Franco Mostacci & Roberto Sabbatini, 2003. "L 'euro ha creato inflazione? Changeover e arrotondamenti dei prezzi al consumo in Italia nel 2002," Moneta e Credito, Economia civile, vol. 56(221), pages 45-95.
    29. Aoki, Kosuke, 2001. "Optimal monetary policy responses to relative-price changes," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 55-80, August.
    30. Veronese, Giovanni & Fabiani, Silvia & Gattulli, Angela & Sabbatini, Roberto, 2005. "Consumer price behaviour in Italy: evidence from micro CPI data," Working Paper Series 449, European Central Bank.
    31. Alexander L. Wolman, 2007. "The frequency and costs of individual price adjustment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(6), pages 531-552.
    32. 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.
    33. Fabiani, Silvia & Gattulli, Angela & Sabbatini, Roberto, 2004. "The pricing behaviour of Italian firms: new survey evidence on price stickiness," Working Paper Series 333, European Central Bank.
    34. Alan S. Blinder, 1994. "On Sticky Prices: Academic Theories Meet the Real World," NBER Chapters, in: Monetary Policy, pages 117-154, National Bureau of Economic Research, Inc.
    35. Jonker, Nicole & Folkertsma, Carsten & Blijenberg, Harry, 2004. "An empirical analysis of price setting behaviour in the Netherlands in the period 1998-2003 using micro data," Working Paper Series 413, European Central Bank.
    36. 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.
    37. Julio J. Rotemberg, 2002. "Customer Anger at Price Increases, Time Variation in the Frequency of Price Changes and Monetary Policy," NBER Working Papers 9320, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paolo Giovane & Roberto Sabbatini, 2008. "Perceived and measured inflation after the launch of the euro: explaining the gap in Italy," Springer Books, in: Paolo Giovane & Roberto Sabbatini (ed.), The Euro, Inflation and Consumer’s Perceptions, chapter 1, pages 13-49, Springer.
    2. Matteo Bugamelli & Alfonso Rosolia, 2006. "Productivity and foreign competition," Temi di discussione (Economic working papers) 578, Bank of Italy, Economic Research and International Relations Area.
    3. Fauzia SOHAIL* & Ambreen FATIMA**, 2018. "PRICE SETTING BEHAVIOUR IN PAKISTAN: Stylized Facts from Micro SPI Dataset," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 28(2), pages 253-286.
    4. Silvia Fabiani & Angela Gattulli & Giovanni Veronese & Roberto Sabbatini, 2010. "Price adjustment in Italy: evidence from micro producer and consumer prices," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 93-104.
    5. Carlos Carvalho & Niels Arne Dam, 2009. "Estimating the cross-sectional distribution of price stickiness from aggregate data," Staff Reports 419, Federal Reserve Bank of New York.
    6. Rafael Portillo & Luis-Felipe Zanna & Stephen O’Connell & Richard Peck, 2016. "Implications of food subsistence for monetary policy and inflation," Oxford Economic Papers, Oxford University Press, vol. 68(3), pages 782-810.
    7. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & Claudia Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in the Euro Area: A Summary of New Micro-Evidence," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 575-584, 04-05.
    8. Luca Dedola & Erwan Gautier & Chiara Osbat & Sergio Santoro, 2024. "Price Stickiness in the Euro Area," Working papers 958, Banque de France.
    9. Andrea Vaona & Guido Ascari, 2012. "Regional Inflation Persistence: Evidence from Italy," Regional Studies, Taylor & Francis Journals, vol. 46(4), pages 509-523, June.
    10. Klenow, Peter J. & Malin, Benjamin A., 2010. "Microeconomic Evidence on Price-Setting," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 6, pages 231-284, Elsevier.
    11. Alvarez González, Luis Julián, 2008. "What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-36.
    12. Eugenio Gaiotti, 2010. "Commentary: Has Globalization Changed the Phillips Curve? Firm-Level Evidence on the Effect of Activity on Prices," International Journal of Central Banking, International Journal of Central Banking, vol. 6(1), pages 51-84, March.
    13. Gautier, Erwan & Karadi, Peter & Conflitti, Cristina & Fabo, Brian & Fadejeva, Ludmila & Fuss, Catherine & Kosma, Theodora & Jouvanceau, Valentin & Martins, Fernando & Menz, Jan-Oliver & Messner, Tere, 2023. "Price adjustment in the euro area in the low-inflation period: evidence from consumer and producer micro price data," Occasional Paper Series 319, European Central Bank.
    14. Josef Baumgartner & Ernst Glatzer & Fabio Rumler & Alfred Stiglbauer, 2005. "How Frequently Do Consumer Prices Change in Austria? Evidence from Micro CPI Data," Working Papers 101, Oesterreichische Nationalbank (Austrian Central Bank).
    15. 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.
    16. Gastón Chaumont & Miguel Fuentes & Felipe Labbé & Alberto Naudon, 2011. "Dinámica de Precios en Chile: Evidencia con datos de Supermercados," Working Papers Central Bank of Chile 642, Central Bank of Chile.
    17. Huw D. Dixon, 2010. "A Unified Framework for Using Micro-Data to Compare Dynamic Wage and Price Setting Models," CESifo Working Paper Series 3093, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alvarez González, Luis Julián, 2008. "What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-36.
    2. Klenow, Peter J. & Malin, Benjamin A., 2010. "Microeconomic Evidence on Price-Setting," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 6, pages 231-284, Elsevier.
    3. Silvia Fabiani & Angela Gattulli & Giovanni Veronese & Roberto Sabbatini, 2010. "Price adjustment in Italy: evidence from micro producer and consumer prices," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 93-104.
    4. Emmanuel Dhyne, 2005. "Price setting in the euro area: Some stylized facts from Individual Consumer Price Data," Working Papers w200506, Banco de Portugal, Economics and Research Department.
    5. Patrick Lünnemann & Thomas Y. Mathä, 2010. "Consumer price behaviour: evidence from Luxembourg micro data," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 177-192.
    6. Emmanuel Dhyne & Jerzy Konieczny & Fabio Rumler & Patrick Sevestre, 2009. "Price rigidity in the euro area - An assessment," European Economy - Economic Papers 2008 - 2015 380, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & Claudia Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in the Euro Area: A Summary of New Micro-Evidence," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 575-584, 04-05.
    8. Filippo Altissimo & Michael Ehrmann & Frank Smets, 2006. "Inflation persistence and price-setting behaviour in the euro area – a summary of the IPN evidence," Occasional Paper Series 46, European Central Bank.
    9. Erwan Gautier, 2009. "Les ajustements microéconomiques des prix : une synthèse des modèles théoriques et résultats empiriques," Revue d'économie politique, Dalloz, vol. 119(3), pages 323-372.
    10. Filippo Altissimo & Michael Ehrmann & Frank Smets, 2006. "Inflation persistence and price-setting behaviour in the euro area : a summary of the Inflation Persistence Network evidence," Working Paper Research 95, National Bank of Belgium.
    11. J. Konieczny, A. Skrzpacz, 2006. "Search, Costly Price Adjustment and the Frequency of Price Changes - Theory and Evidence," Working Papers eg0054, Wilfrid Laurier University, Department of Economics, revised 2006.
    12. Alexander L. Wolman, 2007. "The frequency and costs of individual price adjustment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(6), pages 531-552.
    13. 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.
    14. Baumgartner, Josef & Glatzer, Ernst & Rumler, Fabio & Stiglbauer, Alfred, 2005. "How frequently do consumer prices change in Austria? Evidence from micro CPI data," Working Paper Series 523, European Central Bank.
    15. Migliardo, Carlo, 2012. "Heterogeneity in price setting behavior, spatial disparities and sectoral diversity: Evidence from a panel of Italian firms," Economic Modelling, Elsevier, vol. 29(4), pages 1106-1118.
    16. Aucremanne, Luc & Dhyne, Emmanuel, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Series 331, European Central Bank.
    17. Veronese, Giovanni & Fabiani, Silvia & Gattulli, Angela & Sabbatini, Roberto, 2005. "Consumer price behaviour in Italy: evidence from micro CPI data," Working Paper Series 449, European Central Bank.
    18. Dhyne, Emmanuel & Fuss, Catherine & Pesaran, M. Hashem & Sevestre, Patrick, 2011. "Lumpy Price Adjustments: A Microeconometric Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(4), pages 529-540.
    19. Juan manuel Julio & Héctor manuel Zárate, 2008. "The Price Setting Behavior in Colombia: evidence from PPI micro data," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 26(56), pages 12-44, June.
    20. repec:onb:oenbwp:y::i:101:b:1 is not listed on IDEAS
    21. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & Claudia Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in the Euro Area: A Summary of New Micro-Evidence," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 575-584, 04-05.

    More about this item

    Keywords

    consumer prices; nominal rigidity; frequency of price change;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_556_05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bdigvit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.