An Empirical Analysis of Price Setting Behavior in the Netherlands in the Period 1998-2003 Using Micro Data

54 Pages Posted: 15 Dec 2004

See all articles by Nicole Jonker

Nicole Jonker

De Nederlandsche Bank (DNB); De Nederlandsche Bank

Carsten Folkertsma

De Nederlandsche Bank nv

Harry Blijenberg

Statistics Netherlands

Date Written: November 2004

Abstract

In this paper, we examine pricing behavior of retail firms in the Netherlands during 1998-2003 using a large database with monthly price quotes of 49 articles, representing different product types. We have conducted this study in order to gain insight in the degree of nominal rigidity of consumer prices in the Netherlands. We find that prices of energy and unprocessed food are most flexible, whereas prices of services are stickiest. A multivariate analysis shows that firm size matters with prices being stickiest in small firms and most flexible in large firms and in retail firms consisting of the owners only. Furthermore, we investigate pass-through effects of VAT changes in prices. We find that VAT increases are almost completely passed on to consumers. Finally, there is some evidence indicating that pricing behavior of retail firms was different during the introduction of the euro than in the period directly preceding it.

Keywords: nominal rigidity of prices, frequency of price change, Cox regression

JEL Classification: E31, D49, C41

Suggested Citation

Jonker, Nicole and Folkertsma, Carsten and Blijenberg, Harry, An Empirical Analysis of Price Setting Behavior in the Netherlands in the Period 1998-2003 Using Micro Data (November 2004). ECB Working Paper No. 413. Available at SSRN: https://ssrn.com/abstract=617806

Nicole Jonker (Contact Author)

De Nederlandsche Bank (DNB) ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Carsten Folkertsma

De Nederlandsche Bank nv ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

Harry Blijenberg

Statistics Netherlands ( email )

Henri Faasdreef 312
The Hague, 2492 JP
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
163
Abstract Views
1,406
rank
187,381
PlumX Metrics