Time-dependent versus state-dependent pricing: a panel data approach to the determinants of Belgian consumer price changes

Arbeitspapier

Using Logistic Normal regressions, we model the price-setting behaviour for a large sample of Belgian consumer prices over the January 1989 - January 2001 period. Our results indicate that time-dependent features are very important, particularly an infinite mixture of Calvo pricing rules and truncation at specific horizons. Truncation is mainly a characteristic of pricing in the service sector where it mostly takes the form of annual Taylor contracts typically renewed at the end of December. Several other variables, including some that can be considered as state variables, are also found to be statistically significant. This is particularly so for accumulated sectoral inflation since the last price change. Once heterogeneity and the role of accumulated inflation are acknowledged, hazard functions become mildly upward-sloping, even in a low inflation regime. The contribution of the state-dependent variables to the pseudo-R² of our equations is, however, not particularly important.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 462

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Single Equation Models; Single Variables: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities ; Market Structure, Pricing, and Design: General ; Price Level; Inflation; Deflation
• Subject: Calvo model ; consumer prices ; state-dependent pricing ; Taylor contracts ; time-dependent pricing ; Truncated Calvo model ; Preisniveau ; Preiselastizität ; Preisrigidität ; Schätzung ; Belgien ; Logit-Modell

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Aucremanne, Luc ; Dhyne, Emmanuel
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/152896
• Last update: 10.03.2025, 11:41 AM CET