How Frequently Do Consumer Prices Change in Austria? Evidence from Micro CPI Data

75 Pages Posted: 21 Sep 2005

See all articles by Josef Baumgartner

Josef Baumgartner

Austrian Institute of Economic Research (WIFO)

Ernst Glatzer

Austrian National Bank - Economic Studies Division

Fabio Rumler

Oesterreichische Nationalbank

Alfred Stiglbauer

Austrian National Bank

Date Written: September 2005

Abstract

Based on individual price records collected for the computation of the Austrian CPI, average frequencies of price changes and durations of price spells are estimated to characterize price setting in Austria. Depending on the estimation method, prices are unchanged for 10 to 14 months on average. We find strong heterogeneity across sectors and products. Price increases occur only slightly more often than price decreases. The typical size of a price increase (decrease) is 11 (15) percent. The aggregate hazard function of prices is decreasing with time. Besides heterogeneity across products and price setters, this is due to oversampling of products with a high frequency of price changes. Accounting for unobserved heterogeneity in estimating the probability of a price change with a fixed-effects logit model, we find a positive effect of the duration of a price spell. During the Euro cash changeover the probability of price changes was higher.

Keywords: Consumer prices, sticky prices, frequency and synchronization of price changes, duration of price spells

JEL Classification: C41, D21, E31, L11

Suggested Citation

Baumgartner, Josef and Glatzer, Ernst and Rumler, Fabio and Stiglbauer, Alfred, How Frequently Do Consumer Prices Change in Austria? Evidence from Micro CPI Data (September 2005). ECB Working Paper No. 523, Available at SSRN: https://ssrn.com/abstract=796768

Josef Baumgartner (Contact Author)

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

Ernst Glatzer

Austrian National Bank - Economic Studies Division ( email )

POB 61
Otto Wagner Platz 3
A-1011 Vienna
Austria
+43+1 40420 7423 (Phone)
+43+1 40420 7499 (Fax)

Fabio Rumler

Oesterreichische Nationalbank ( email )

Otto-Wagner Platz 3
POB 61
Vienna 1011
Austria

Alfred Stiglbauer

Austrian National Bank ( email )

Otto-Wagner Platz 1
A-1011 Vienna
Austria

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