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Angela Gattulli

22 April 2004
WORKING PAPER SERIES - No. 333
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Abstract
This study examines price setting behaviour of Italian firms on the basis of the results of a survey conducted by Banca d'Italia in early 2003 on a sample of around 350 firms belonging to all economic sectors. Prices are mostly fixed following standard mark-up rules, although customer-specific characteristics have a role, in particular in manufacturing and services where price discrimination across customers matters. Rival prices mostly affect pricesetting strategies in industrial firms. In reviewing their prices, firms follow either state-dependent rules or a combination of time and state-dependent ones. Concerning the frequency of price adjustments, a considerable degree of stickiness emerges both at the stage in which firms evaluate their pricing strategies and the stage in which they actually implement the price change. In 2002 most firms changed their price only once. Three alternative explanations of nominal rigidity are ranked highest by the firms interviewed: explicit contracts, tacit collusive behaviour and the perception of the temporary nature of the shock. Prices respond asymmetrically to shocks, depending on the direction of the adjustment (positive vs negative) and the source of the shock (demand vs supply). Real rigidities - captured by the degree of market competition, customers' search costs, the sensitivity of profits to changes in demand - play an important role in determining this asymmetry. Moreover, whereas cost shocks impact more when prices have to be raised than when they have to be reduced, demand decreases are more likely to induce a price change than demand increases.
JEL Code
E30 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→General
D40 : Microeconomics→Market Structure and Pricing→General
Network
Eurosystem inflation persistence network
16 March 2005
WORKING PAPER SERIES - No. 449
Details
Abstract
This paper investigates the behaviour of consumer prices in Italy by looking at micro data in the attempt to obtain a quantitative measure of the unconditional degree of price rigidity in the Italian economy. The analysis focuses on the monthly frequency of price changes and on the duration of price spells, also with reference to different types of products and outlets. Prices tend to remain unchanged on average for around 10 months; duration is longer for nonenergy industrial goods and services and much shorter for energy products. Price changes are more frequent upward than downward, in larger stores than in traditional ones. When the geographical location of outlets is accounted for, price changes display considerable synchronisation, in particular in the service sector.
JEL Code
D21 : Microeconomics→Production and Organizations→Firm Behavior: Theory
D40 : Microeconomics→Market Structure and Pricing→General
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
Network
Eurosystem inflation persistence network