Patterns and Determinants of Price Changes: Analysing Individual Consumer Prices in Austria

✍ Scribed by Fabio Rumler; Alfred Stiglbauer; Josef Baumgartner

• Book ID: 111062402
• Publisher: John Wiley and Sons
• Year: 2011
• Tongue: English
• Weight: 175 KB
• Volume: 12
• Category: Article
• ISSN: 1465-6485
• DOI: 10.1111/j.1468-0475.2010.00523.x

✦ Synopsis

Abstract

We provide empirical evidence on the degree and characteristics of price stickiness in Austria by estimating the average frequency of price changes and the duration of price spells from a large dataset of individual price records collected for the computation of the Austrian consumer price index. The mean (median) duration of price spells in Austria amounts to 14 (11) months, but there is considerable heterogeneity across sectors and products. We find that price increases occur only slightly more often than price decreases. For both directions, the average magnitude of price changes is quite large (11% and 14%, respectively). The introduction of the euro cash in January 2002 led to more frequent but, on average, smaller price adjustments than usual. Estimating the probability of a price change in a panel probit model, we find a small but positive effect of the price spell duration on the incidence of price changes. Furthermore, product-specific inflation, the size and the sign of the last price change and the period of the euro introduction significantly affect the probability of a price change.