Intermittent Price Changes in Production Plants: Empirical Evidence using Monthly Data.
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Date
2016-12Metadata
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- Discussion papers (SAM) [662]
Abstract
The price-setting behaviour of manufacturing plants is examined using a
large panel of monthly surveyed plant- and product-specific prices. The sample
shows a high frequency of zero changes, relatively small price changes, and
a strong seasonal price change pattern. The intermittent feature of price
changes is modelled with thresholds which are lower in January, and a quadratic
loss–function associated with the distance from target price. The findings show
statistically significant pricing thresholds, which are only two thirds in January,
and partial adjustment parameters implying that 60% of the deviation between
the target price and current price is closed each month.