Discussion paper

DP14907 Demand or Supply? Price Adjustment during the Covid-19 Pandemic

We study price-setting behavior in German firm-level survey data to infer the relative
importance of supply and demand during the Covid-19 pandemic. Supply and
demand forces coexist, but demand shortages dominate in the short run. A reported
negative impact of Covid-19 on current business is associated with a rise in the probability
to decrease prices up to eleven percentage points. These results imply a role for
aggregate demand stabilization policy to buffer the economic consequences of Covid-
19 while containing the pandemic.

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Citation

Balleer, A, S Link, M Menkhoff and P Zorn (2020), ‘DP14907 Demand or Supply? Price Adjustment during the Covid-19 Pandemic‘, CEPR Discussion Paper No. 14907. CEPR Press, Paris & London. https://cepr.org/publications/dp14907