Price setting behaviour in Spain: stylised facts using consumer price micro data

Luis Alvarez and Ignacio Hernando

No 422, Working Papers from Banco de España

Abstract: This paper identifies the basic features of the price setting mechanism in the Spanish economy, using a large dataset that contains over 1.1 million price records and covers around 70% of the expenditure on the CPI basket. In particular, the paper identifies differences in the frequency and size of price adjustments across types of products and explores how these general features are affected by certain specific factors: seasonality, the level of inflation, changes in indirect taxation and the practice of using psychological and round prices. We find that prices do not change often but do so by a large amount, although there is a marked heterogeneity across products. Moreover, the high frequency of price reductions suggests that there is no strong downward rigidity. Our evidence also supports the use of time and state dependent pricing strategies.

Keywords: price setting; consumer prices; frequency of price changes (search for similar items in EconPapers)
JEL-codes: C25 D40 E31 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2004-12
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Citations: View citations in EconPapers (47)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/04/Fic/dt0422e.pdf First version, December 2004 (application/pdf)

Related works:
Working Paper: Price setting behaviour in Spain: stylised facts using consumer price micro data (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0422

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