Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26055
Authors: 
Dhyne, Emmanuel
Fuss, Catherine
Pesaran, Mohammad Hashem
Sevestre, Patrick
Year of Publication: 
2007
Series/Report no.: 
CESifo working paper 2010
Abstract: 
This paper presents a simple model of state-dependent pricing that allows identification of the relative importance of the degree of price rigidity that is inherent to the price setting mechanism (intrinsic) and that which is due to the price's driving variables (extrinsic). Using two data sets consisting of a large fraction of the price quotes used to compute the Belgian and French CPI, we are able to assess the role of intrinsic and extrinsic price stickiness in explaining the occurrence and magnitude of price changes at the outlet level. We find that infrequent price changes are not necessarily associated with large adjustment costs. Indeed, extrinsic rigidity appears to be significant in many cases. We also find that asymmetry in the price adjustment could be due to trends in marginal costs and/or desired mark-ups rather than asymmetric cost of adjustment bands.
JEL: 
C51
C81
D21
Document Type: 
Working Paper

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