Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207233 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7842
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We take a monthly panel of German firms over the period 1980–2017 to examine the relative importance of time and state dependence in the decisions of firms to raise, lower or leave their price constant. In addition, we seek to estimate the relative importance of macroeconomic factors and firm-specific factors within state dependence. While price decreases can be well explained by time dependence alone, price increases are best predicted by the interaction of time-dependent and firm-specific state factors. Whilst on their own macroeconomic variables might seem important, once we add firm-specific variables the effects of macroeconomic variables become much smaller in magnitude. Our empirical results suggest that theoretical models should integrate both time and state dependence rather than developing the approaches separately. We also show that time dependence is better captured if we allow for different hazard functions for price increases and decreases.
Subjects: 
survey data
price setting
extensive margin
state-dependent pricing
time-dependent pricing
JEL: 
E30
E31
E32
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.