R(a)ising Prices While Struggling: Firms’ Financial Constraints and Price Setting

Abstract: Working Paper Series no. 942. This paper investigates the interaction between financial constraints faced by firms and their price setting behaviour. We find systematic differences in the frequencies of price increases and decreases between financially constrained and unconstrained firms, consistently across several alternative proxies. Financial constraints affect price adjustments asymmetrically. When firms are financially struggling, they are more likely to increase their prices, while simultaneously exhibiting greater rigidity in lowering prices.

Keywords: Producer Price Setting; Firm Financial Constraints; Customer Market (search for similar items in EconPapers)
JEL-codes: E31 G30 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2024
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-com and nep-inv
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:942

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