Formal Sector Price Discoveries: Results from a Developing Country

Ali Choudhary (), Saima Naeem, Abdul Faheem, Nadim Haneef and Farooq Pasha ()
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Abdul Faheem: State Bank of Pakistan
Nadim Haneef: State Bank of Pakistan
Authors registered in the RePEc Author Service: Dr. Muhammad Nadim Hanif ()

No 1011, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: We present results of 1189 structured interviews about price-setting behavior of firms in the manufacturing and services sector in Pakistan. Our discoveries are that frequency of price change is considerably high, lowering the real impact of monetary policy. The remaining price stickiness is explained by firms caring about relative prices and the persistence of shocks. The exchange-rate and cost shocks are more important than financial and demand shocks for both setting prices and also the readiness with which these pass-through to the economy. Firms with connections with the informal sector, especially through demand, have a lower probability of price adjustment.

JEL-codes: E32 E52 O11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dev, nep-hme, nep-iue and nep-mac
Date: 2011-09
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Persistent link: http://EconPapers.repec.org/RePEc:sur:surrec:1011

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