Consumer Price Adjustment Under the Microscope: Germany in a Period of Low Inflation

Hoffmann, Johannes; Kurz‐Kim, Jeong‐Ryeol

doi:10.2139/ssrn.911264

Cited by 36 publications

(16 citation statements)

References 3 publications

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“…However, in some euro area countries in our sample, information on sales is missing in the corresponding micro price database. 11 Moreover, in countries where a sales flag is reported by the NSI, its definition might depend on national practices (see for instance Hoffmann and Kurz-Kim, 2006 for an earlier discussion on the potential limits of the flag in the German case). Hence, as a robustness exercise, we have implemented and extended a sales filter building on Nakamura and Steinsson (2008a) in order to identify sales in a consistent way across countries (see Appendix A.3 for a detailed explanation of the way we calculate price changes using NSI flags or the sales filter).…”

Section: Treatment Of Sales and Substitutionsmentioning

confidence: 99%

“…However, little evidence has been made available for the euro area as a whole whereas country-specific evidence has been documented recently by Berardi et al (2015) for instance. In Dhyne et al (2006), price changes due to sales were very imperfectly observed in many national micro datasets including Belgium, Germany (see Hoffmann and Kurz-Kim, 2006 for discussion), Italy and Spain ( Álvarez and Hernando, 2006) either because sales flags were not available or because the methodology of price collection failed to capture all prices on sales. This complicates cross-country comparisons as well as the assessment of the usual price rigidity measures (which often exclude price changes due to sales) for the euro area as a whole.…”

Section: Introductionmentioning

confidence: 99%

“…Early studies covering periods between the late 1990s and early 2000s include for instanceBaudry et al (2007) for France, CostaDias et al (2008) for Portugal,Hoffmann and Kurz-Kim (2006) for Germany,Álvarez and Hernando (2006) for Spain,Aucremanne and Dhyne (2004) for Belgium,Rumler et al (2011) for Austria, andBenkovskis et al (2012) for Latvia, among others. More recently, see alsoBerardi et al (2015) for France orBlanas and Zimmer (2020) for Belgium.…”

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confidence: 99%

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New facts on consumer price rigidity in the Euro area

Petroulas¹,

Gautier²,

Fabo³

et al. 2022

Working Paper

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Using CPI micro data for 11 euro area countries covering about 60% of the euro area consumption basket over the period 2010-2019, we document new findings on consumer price rigidity in the euro area: (i) each month on average 12.3% of prices change, which compares with 19.3% in the United States; when we exclude price changes due to sales, however, the proportion of prices adjusted each month is 8.5% in the euro area versus 10% in the United States; (ii) differences in price rigidity are rather limited across euro area countries but much larger across sectors; (iii) the median price increase (resp. decrease) is 9.6% (13%) when including sales and 6.7% (8.7%) when excluding sales; cross-country heterogeneity is more pronounced for the size than for the frequency of price changes; (iv) the distribution of price changes is highly dispersed: 14% of price changes in absolute values are lower than 2% whereas 10% are above 20%; (v) the overall frequency of price changes does not change much with inflation and does not react much to aggregate shocks; (vi) changes in inflation are mostly driven by movements in the overall size; when decomposing the overall size, changes in the share of price increases among all changes matter more than movements in the size of price increases or the size of price decreases. These findings are consistent with the predictions of a menu cost model in a low inflation environment where idiosyncratic shocks are a more relevant driver of price adjustment than aggregate shocks.

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Section: Treatment Of Sales and Substitutionsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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confidence: 99%

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New facts on consumer price rigidity in the Euro area

Petroulas¹,

Gautier²,

Fabo³

et al. 2022

Working Paper

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“…Th at proportion did not start to decline until 2005, and then only very slowly. Moreover, Cornille and Stragier (2007) and Hoff mann and Kurz-Kim (2006) show for, respectively, Belgium and Germany that the changeover led to a substantial and persistent increase in price diversity, which further complicates information-processing for consumers. Finally, many people still tend to convert prices into their old national currency, although mainly for more expensive purchases.…”

Section: Th E Impact Of the Introduction Of Banknotes And Coins In Eu...mentioning

confidence: 99%

What have we learned about prices and inflation in 10 years of monetary union?

Aucremanne¹,

Boeckx²,

Dhyne³

et al. 2009

l'Europe en Formation

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Distribution électronique Cairn.info pour Centre international de formation européenne. © Centre international de formation européenne. Tous droits réservés pour tous pays.La reproduction ou représentation de cet article, notamment par photocopie, n'est autorisée que dans les limites des conditions générales d'utilisation du site ou, le cas échéant, des conditions générales de la licence souscrite par votre établissement. Toute autre reproduction ou représentation, en tout ou partie, sous quelque forme et de quelque manière que ce soit, est interdite sauf accord préalable et écrit de l'éditeur, en dehors des cas prévus par la législation en vigueur en France. Il est précisé que son stockage dans une base de données est également interdit.

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“…VAT 07 trend takes a value of one for VAT items in January 2007 and increases monthly by one until December 2007.9 There is no a priori reason to use a VAT trend variable for the announcement period 2006. Rather the choice of using a trend was the based on the goodness of fit among alternative empirical specifications.10 A currency conversion should not lead to a change in prices, because, as Hoffman andKurz-Kim (2006) note, because otherwise prices are costly to change (the menu-cost hypothesis). Therefore, we surmise that large positive increases during that period signal price setting power.…”

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confidence: 99%