Intermittent Price Changes in Production Plants: Empirical Evidence using Monthly Data.

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.