Demand or Supply? Price Adjustment during the Covid-19 Pandemic

Almut Balleer, Peter Zorn (peter.zorn@econ.lmu.de), Sebastian Link and Manuel Menkhoff

No 14907, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study price-setting behavior in German firm-level survey data to infer the relative importance of supply and demand during the Covid-19 pandemic. Supply and demand forces coexist, but demand shortages dominate in the short run. A reported negative impact of Covid-19 on current business is associated with a rise in the probability to decrease prices up to eleven percentage points. These results imply a role for aggregate demand stabilization policy to buffer the economic consequences of Covid- 19 while containing the pandemic.

Keywords: Producer price setting; Supply; Demand; Covid-19; Fiscal policy (search for similar items in EconPapers)
JEL-codes: D22 E31 E32 E60 H50 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (57)

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Working Paper: Demand or Supply? Price Adjustment during the Covid-19 Pandemic (2020)
Working Paper: Demand or Supply? Price Adjustment during the COVID-19 Pandemic (2020)
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