Price Rigidity. Evidence from the French CPI Micro-Data

76 Pages Posted: 10 Dec 2004

See all articles by Laurent Baudry

Laurent Baudry

Banque de France - Centre de Recherche; University of Lille I

Hervé le Bihan

Banque de France - Centre de Recherche

Patrick Sevestre

Aix-Marseille University

Sylvie Tarrieu

Banque de France - Centre de Recherche

Date Written: August 2004

Abstract

Based upon a large fraction of the price records used for computing the French CPI, we document consumer price rigidity in France. We first provide a methodological discussion of issues involved in estimating average price duration with micro-data. The average duration of prices in the sectors covered by the database (65% of the CPI) is then found to be around 8 months. A strong heterogeneity across sectors both in the average duration of prices and in the pattern of price setting is reported. There is no clear evidence of downward nominal rigidity, since price cuts are almost as frequent as price rises. Moreover, the average size of a change in price is quite large in both cases. Overall, while our results do not entail a clear conclusion about the existence of menu costs, there is evidence of both time-dependent and state-dependent price setting behaviors by retailers.

Keywords: Price stickiness, duration of prices, consumer price index, frequency of price change

JEL Classification: E31, D43, L11

Suggested Citation

Baudry, Laurent and Le Bihan, Herve and Sevestre, Patrick and Tarrieu, Sylvie, Price Rigidity. Evidence from the French CPI Micro-Data (August 2004). Available at SSRN: https://ssrn.com/abstract=569631 or http://dx.doi.org/10.2139/ssrn.569631

Laurent Baudry

Banque de France - Centre de Recherche ( email )

31 rue Croix des Petits Champs
75049 Paris Cedex 01
France

University of Lille I ( email )

104, avenue du peuple Belge
Villeneuve d'Ascq Cedex, 59655
France

Herve Le Bihan (Contact Author)

Banque de France - Centre de Recherche ( email )

31 rue Croix des Petits Champs
Room 41-1391
75049 Paris Cedex 01
France

Patrick Sevestre

Aix-Marseille University ( email )

3 Avenue Robert Schuman
3 Avenue Robert Schuman,
Aix-en-Provence, 13628
France

Sylvie Tarrieu

Banque de France - Centre de Recherche ( email )

31 rue Croix des Petits Champs
75049 Paris Cedex 01
France

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