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Price Setting Behaviour in Latvia: Descriptive Evidence from CPI Microdata

Author

Listed:
  • Konstantins Benkovskis

    (Bank of Latvia)

  • Ludmila Fadejeva

    (Bank of Latvia)

  • Krista Kalnberzina

    (Bank of Latvia)

Abstract
The question of price stickiness remains one of the most important in macroeconomics, as price flexibility partly determines how long it takes for inflation and real economic variables to return to their potential levels after a shock. To get a better understanding of price change frequency and size, the empirical work on price stickiness based on microdata from surveys on prices of individual products from individual outlets is needed. The main goal of this study is to provide descriptive evidence on the degree of nominal rigidity of consumer prices in Latvia at aggregate and disaggregate levels. To achieve this goal, we use the micro database on consumer prices provided by the CSB. The main finding of the paper is that during 2003–2009 Latvia's consumer prices were flexible. The average duration of a price spell was 3.5 months, and every month on average 28.7% of consumer prices were changed.

Suggested Citation

  • Konstantins Benkovskis & Ludmila Fadejeva & Krista Kalnberzina, 2010. "Price Setting Behaviour in Latvia: Descriptive Evidence from CPI Microdata," Discussion Papers 2010/01, Latvijas Banka.
    • Handle: RePEc:ltv:dpaper:201001
    as

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    File URL: https://www.bank.lv/public_files/images/img_lb/izdevumi/latvian/citas/diskusij_mater/dm_2010-1_en.pdf
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    File URL: https://www.macroeconomics.lv/sites/default/files/dm_2010-1_en.pdf
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Konstantins Benkovskis & Ludmila Fadejeva, 2014. "The effect of VAT rate on inflation in Latvia: evidence from CPI microdata," Applied Economics, Taylor & Francis Journals, vol. 46(21), pages 2520-2533, July.
    2. Ludmila Fadejeva & Olegs Krasnopjorovs, 2015. "Labour market adjustment during 2008-2013 in Latvia: firm level evidence," Working Papers 2015/02, Latvijas Banka.
    3. Benkovskis, Konstantins & Fadejeva, Ludmila & Kalnberzina, Krista, 2012. "Price setting behaviour in Latvia: Econometric evidence from CPI micro data," Economic Modelling, Elsevier, vol. 29(6), pages 2115-2124.
    4. Ludmila Fadejeva & Ieva Opmane, 2016. "Internal labour market mobility in 2005–2014 in Latvia: the micro data approach," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 16(2), pages 152-174.

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    More about this item

    Keywords

    price setting behaviour; Latvia's consumer prices; frequency of price change; duration; size of price change; sales; time-dependent pricing; state-dependent pricing;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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