Firm-level uncertainty and output prices

Elena Mattevi () and Tullia Padellini ()
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Elena Mattevi: Bank of Italy
Tullia Padellini: Bank of Italy

No 966, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Based on the unique information provided by Banca d'Italia's Survey on Inflation and Growth Expectations, we develop an indicator of firm-level ex ante uncertainty on future business conditions and use it to estimate the relationship between uncertainty and the expected development of each firm's selling prices. We find evidence that price flexibility increases with uncertainty: firms facing uncertainty both show a higher propensity to introduce price changes in the following months (extensive margin) and to make larger price changes compared with the other firms (intensive margin). This evidence suggests that price stickiness may ease in times of high uncertainty.

Keywords: prices; uncertainty; firms; expectations; business survey (search for similar items in EconPapers)
JEL-codes: C81 C83 D22 D80 E3 (search for similar items in EconPapers)
Date: 2025-10
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_966_25

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