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Why Are Some Prices Stickier Than Others? Firm-Data Evidence on Price Adjustment Lags

Carlos Marques (), Fernando Martins (), Daniel Dias () and João Santos Silva ()

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: Infrequent price changes at the firm level are now well documented in the literature. However, a number of issues remain partly unaddressed. This paper contributes to the literature on price stickiness by investigating the lags of price adjustments to different types of shocks. We find that adjustment lags to cost and demand shocks vary with firm characteristics, namely the firm’s cost structure, the type of pricing policy, and the type of good. We also document that firms react asymmetrically to demand and cost shocks, as well as to positive and negative shocks, and that the degree and direction of the asymmetry varies across firms.

JEL-codes: C41 D40 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-com and nep-hme
Date: 2011
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Working Paper: Why are some prices stickier than others? Firm-data evidence on price adjustment lags (2011) Downloads
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