Micro Evidence on the Adjustment of Sticky-Price Goods: It's How Often, Not How Much

Lorenz Götte, Rudolf Minsch and Jean-Robert Tyran ()
Authors registered in the RePEc Author Service: Lorenz Goette ()

No 5364, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use a unique panel data set to analyse price setting in restaurants in Switzerland 1977-93, for items known to have sticky prices. The macroeconomic environment during this time period allows us to examine how firms adjust prices at low (0%) and fairly high (7%) inflation. Our results indicate that firms strongly react to inflation in the timing of their price adjustment: hazard of price changes is increasing with time and becomes steeper at higher inflation rates. However, we find little evidence that the amount by which they change the price responds to the inflation rate.

Keywords: inflation; nominal inertia; sticky prices (search for similar items in EconPapers)
JEL-codes: B49 D21 E30 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mic
Date: 2005-12
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Working Paper: Micro Evidence on the Adjustment of Sticky-Price Goods: It's How Often, not How Much (2005)
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