| By: |
Josef Baumgartner (Austrian Institute of Economic Research (WIFO), Arsenal Objekt 20, POB 91, 1103 Vienna, Austria);
Ernst Glatzer (Oesterreichische Nationalbank, Economic Analysis Division, Otto-Wagner-Platz 3, POB 61, 1011 Vienna, Austria);
Fabio Rumler (Oesterreichische Nationalbank, Economic Analysis Division, Otto-Wagner-Platz 3, POB 61, 1011 Vienna, Austria);
Alfred Stiglbauer (Oesterreichische Nationalbank, Economic Analysis Division, Otto-Wagner-Platz 3, POB 61, 1011 Vienna, Austria) |
| Abstract: |
In this paper a data set with price records collected for the computation of
the Austrian CPI is used to estimate the average frequency of price changes
and the duration of price spells to provide empirical evidence on the degree
and characteristics of price rigidity in Austria. Depending on the estimation
method applied, on average, prices are unchanged for 10 to 14 months. We find
a strong heterogeneity across sectors and products. Price increases occur only
slightly more often than price decreases. For both cases the typical size of
the weighted average price change is quite large (11 and 15 percent,
respectively). Like in related contributions we find that the aggregate hazard
function is decreasing with time. Apart from heterogeneity across products and
price setters, this is due to oversampling of products with a high frequency
of price changes. Accounting for the unobserved heterogeneity in estimating
the probability of a price change with a panel logit model (with fixed
elementary product effects), we find a small but positive effect of the
duration of a price spell on the probability of a price change. We also find
that during the Euro cash changeover period the probability of price changes
was higher. |