Working Paper: CEPR ID: DP5300
Authors: Denis Fougre; Herv Le Bihan; Patrick Sevestre
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 thatdistinguish 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.
Keywords: duration models; hazard function; heterogeneity; sticky prices
JEL Codes: C41; E31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cumulative sectoral inflation (E31) | probability of price increase (E30) |
| heterogeneity in price stickiness (C54) | shape of the hazard function (C41) |
| heterogeneity in price stickiness (C54) | impact of covariates (C34) |
| baseline hazard function (C41) | price changes (P22) |
| price stickiness (L11) | probability of price changes (E30) |