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

Lorenz Goette (), Rudolf Minsch and Jean-Robert Tyran ()
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Rudolf Minsch: University of Applied Sciences, Chur, Switzerland

No 05-20, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: We use a unique panel data set to analyze 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: sticky prices; inflation; nominal inertia (search for similar items in EconPapers)
JEL-codes: E30 E31 D21 B49 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mic
Date: 2005-11
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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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