Changing Prices… Changing Times: Evidence for Italy

31 Pages Posted: 3 Feb 2017

Date Written: January 25, 2017

Abstract

This paper examines the process of adjustment of prices in Italy to determine whether nominal flexibility, measured by the frequency of price changes, has increased in the recent years of protracted stagnation and double-dip recession. The analysis is based on a large micro-level dataset of individual prices collected monthly by Istat from 2006 to 2013 for the Consumer Price Index. We find that both the percentage of prices adjusted monthly and the average size of the adjustment have risen significantly since the 1996-2001 period, in particular for downward changes. This greater flexibility is related in part to the spread of modern distribution structures. Our estimates further indicate that the recession has affected the price adjustment mechanism: for manufactures, price cuts have become larger and more frequent, while increases are more moderate; for services, both the frequency and the size of price increases have diminished.

Keywords: consumer prices, nominal flexibility, frequency of price adjustment

JEL Classification: E31, D21, D40, L11

Suggested Citation

Porqueddu, Mario and Fabiani, Silvia, Changing Prices… Changing Times: Evidence for Italy (January 25, 2017). ECB Working Paper No. 2002. Available at SSRN: https://ssrn.com/abstract=2910932

Mario Porqueddu (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Silvia Fabiani

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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