Price Setting in Austria — Results from the Eurosystem Inflation Persistence Network

Claudia Kwapil () and Fabio Rumler
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Claudia Kwapil: Oesterreichische Nationalbank, Economic Analysis Division, http://www.oenb.at

Monetary Policy & the Economy, 2005, issue 4

Abstract: This study examines price setting in Austria using micro observations of Consumer Price Index (CPI) data on the one hand and a one-time survey on firms' price-setting practices on the other hand. The analysis of the micro CPI data shows that consumer prices are adjusted roughly once a year averaged over all items in the CPI. However, there are enormous differences across sectors: The prices of energy products and unprocessed food are adjusted most often whereas the prices of nonenergy industrial goods and of services are changed less frequently. Austria ranks roughly in the middle range among euro area countries in terms of the frequency of price changes; it does not stand out for either especially rigid or especially flexible prices. Judging from the data set analyzed, the euro cash changeover did not bring about a significant inflationary effect. The supplementary company survey revealed that (producer) prices are reviewed four times as often as they are actually adjusted — about once a year. Price rigidity evidently tends to arise more at the second level of price formation, namely at the actual price-setting level. Firms state implicit (long-term customer relationships) and explicit contracts as causes for delaying price adjustments.

Keywords: inflation persistence; nominal rigidity; price-setting. (search for similar items in EconPapers)
JEL-codes: E31 L14 (search for similar items in EconPapers)
Date: 2005
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