Consumer Price Behaviour in Luxembourg: Evidence from Micro CPI Data

62 Pages Posted: 30 Nov 2005

See all articles by Patrick Lunnemann

Patrick Lunnemann

Banque Central du Luxembourg

Thomas Y. Mathä

Banque centrale du Luxembourg

Date Written: November 2005

Abstract

This paper uses micro-level price data and analyses the behaviour of consumer prices in Luxembourg. We find that the median duration of consumer prices is roughly 8 months. The median durations of energy and unprocessed food are about 1.5 and 5 months, while prices of services typically change fewer than once a year. For some product types, such as non-energy industrial goods and processed food, a relatively large share of the observed price changes is reverted afterwards. With the exception of services, individual prices do not show signs of downward rigidity. On average, price decreases are as large as price increases. Price changes are determined both by state- and time-dependent factors. Accumulated price and wage inflation, wage adjustment due to indexation, the cash changeover and a larger number of competitors increase the probability of a price change, while pricing at attractive pricing points and price regulation have the opposite effect.

Keywords: Price setting, consumer prices, rigidity, wage indexation, sales

JEL Classification: E31, C23, C41

Suggested Citation

Lunnemann, Patrick and Mathä, Thomas Y., Consumer Price Behaviour in Luxembourg: Evidence from Micro CPI Data (November 2005). ECB Working Paper No. 541, Available at SSRN: https://ssrn.com/abstract=828986

Patrick Lunnemann (Contact Author)

Banque Central du Luxembourg ( email )

2, boulevard Royal
L-2983 Luxembourg
Luxembourg

Thomas Y. Mathä

Banque centrale du Luxembourg ( email )

2, bd Royal
L-2983 Luxembourg
Luxembourg
+352 4774 4270 (Phone)
+352 4774 4920 (Fax)

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