Discussion Paper Details

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Title: Heterogeneity in Consumer Price Stickiness: A Microeconometric Investigation

Author(s): Denis Fougère, Hervé Le Bihan and Patrick Sevestre

Publication Date: October 2005

Keyword(s): duration models, hazard function, heterogeneity and sticky prices

Programme Area(s): International Macroeconomics

Abstract: This paper examines heterogeneity in price stickiness using a large, original, set of individual price data collected at the retail level for the computation of the French CPI. For that purpose, we estimate at a very high level of disaggregation competing-risks duration models that distinguish between price increases, price decreases and product replacements. The main findings are the following: i) cross-product and cross-outlet-type heterogeneity is pervasive, both in the shape of the hazard function and in the impact of covariates; ii) at the product-outlet type level, the baseline hazard function of a price spell is non-decreasing; iii) there is strong evidence of state dependence, especially for price increases.

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Bibliographic Reference

Fougère, D, Le Bihan, H and Sevestre, P. 2005. 'Heterogeneity in Consumer Price Stickiness: A Microeconometric Investigation'. London, Centre for Economic Policy Research.