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

Almut Balleer (), Sebastian Link, Manuel Menkhoff () and Peter Zorn ()
Additional contact information
Almut Balleer: RWTH Aachen University
Manuel Menkhoff: Ifo Institute for Economic Research

No 13568, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: E31 E32 H50 E60 D22 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-08
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (15) Track citations by RSS feed

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