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  • Open Access

Price-setting behaviour in Switzerland: Evidence from CPI micro data

Swiss Journal of Economics and Statistics2009145:BF03399283

https://doi.org/10.1007/BF03399283

  • Published:

Summary

This paper investigates price-setting behaviour of firms based on the individual price quotes underlying the Swiss consumer price index. The data set covers the years from 1993 to 2005. Six main findings emerge from the analysis. (i) Prices are sticky; the median duration amounts to 4.6 quarters. (ii) Price-setting behaviour is heterogeneous across sectors and outlet characteristics. (iii) Price changes are sizeable; the median absolute size amounts to 9.4%. (iv) There is little evidence of downward price stickiness; almost half of all price changes are decreases. An exception is the service sector, however, where there is evidence of asymmetries in price-setting due to downward rigid wages. (v) Firms respond to expected cost shocks at the date of their occurrence; VAT rate changes do not lead to more price adjustments before they take effect. (vi) There is some evidence that firms adjust their behaviour according to the state of the economy; in particular, firms facing higher rates of inflation adjust prices more frequently.

JEL-Classification

  • E31
  • D40

Keywords

  • CPI data
  • pricesetting
  • frequency of price changes
  • nominal price rigidity
  • time-dependent pricing
  • state-dependent pricing

Notes

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