EconPapers    
Economics at your fingertips  
 

Time-varying business volatility and the price setting of firms

Ruediger Bachmann (), Benjamin Born, Steffen Elstner () and Christian Grimme ()

Journal of Monetary Economics, 2019, vol. 101, issue C, 82-99

Abstract: Does time-varying business uncertainty/volatility affect the price setting of firms and in what way? We estimate from the micro data of the German ifo Business Climate Survey the impact of idiosyncratic volatility on the extensive margin of firm-level price setting behavior. Heightened uncertainty increases the probability of a price change, suggesting that, for price setting, the volatility effect dominates the “wait-and-see” effect. In a second step, we use structural vector autoregressions to estimate the effects of uncertainty on the intensive pricing margin. Higher uncertainty leads to an increase in price dispersion and to larger price adjustments.

Keywords: Survey data; Time-varying uncertainty/volatility; Price setting; Extensive margin; Intensive margin (search for similar items in EconPapers)
JEL-codes: E30 E31 E32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393218303982
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Time-Varying Business Volatility and the Price Setting of Firms (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:101:y:2019:i:c:p:82-99

DOI: 10.1016/j.jmoneco.2018.07.013

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-09-16
Handle: RePEc:eee:moneco:v:101:y:2019:i:c:p:82-99