How do individual UK consumer prices behave?

Philip Bunn and Colin Ellis ()
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Colin Ellis: BVCA and University of Birmingham

No 438, Bank of England working papers from Bank of England

Abstract: This paper examines the behaviour of individual consumer prices in the United Kingdom, and uncovers a number of stylised facts about pricing behaviour. First, on average 19% of prices change each month, although this falls to 15% if sales are excluded. Second, the probability of price changes is not constant over time. Third, goods prices change more frequently than services prices. Fourth, the distribution of price changes is wide, although a significant number of changes are relatively small and close to zero. Fifth, prices that change more frequently tend to do so by less. We find that conventional pricing theories struggle to match these results, particularly the marked heterogeneity, which argues against the use of ‘representative agent’ models.

Keywords: Consumer prices; price-setting behaviour. (search for similar items in EconPapers)
JEL-codes: D40 E31 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2011-10-31
New Economics Papers: this item is included in nep-cba and nep-hme
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0438

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