Time or state dependent price setting rules? Evidence from portuguese micro data

Marques, Carlos R.; Dias, Daniel; Silva, João Santos

http://hdl.handle.net/10400.5/23999

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Authors

Marques, Carlos R.

Dias, Daniel

Silva, João Santos

Abstract(s)

In this paper we analyse the ability of time and state dependent price setting rules to explain durations of price spells or the probability of changing prices.Our results suggest that simple time dependent models cannot be seen as providing a reasonable approximation to the data and that state dependent models are required to fully characterise the price setting behaviour of Portuguese firms. Inflation, the level of economic activity and the magnitude of the last price change emerge as relevant variables a.ecting the probability of changing prices. Moreover, it is seen that the impact differs for negative and positive values of these covariates.

Keywords

Euro Area Macroeconometric Modelling

URI

http://hdl.handle.net/10400.5/23999

Citation

Marques, Carlos R.. Daniel Dias and João S. Silva .2005. “Time or state dependent price setting rules? Evidence from portuguese micro data” .Banco de Portugal. Economic and Research Department. Working Papers nº 8 | 2005.