331 research outputs found
Why are Prices Sticky? Evidence from Business Survey Data
This paper offers new insights on the price setting behaviour of German retail firms using a novel dataset that
consists of a large panel of monthly business surveys from 1991-2006. The firm-level data allows matching changes
in firms' prices to several other firm-characteristics. Moreover, information on price expectations allow analyzing
the determinants of price updating. Using univariate and bivariate ordered probit specifications, empirical menu
cost models are estimated relating the probability of price adjustment and price updating, respectively, to both
time- and state- dependent variables. First, results suggest an important role for state-dependence; changes in
the macroeconomic and institutional environment as well as firm-specific factors are significantly related to the
timing of price adjustment. These findings imply that price setting models should endogenize the timing of price
adjustment in order to generate realistic predictions concerning the transmission of monetary policy. Second, an
analysis of price expectations yields similar results providing evidence in favour of state-dependent sticky plan
models. Third, intermediate input cost changes are among the most important determinants of price adjustment
suggesting that pricing models should explicitly incorporate price setting at different production stages. However, the results show that adjustment to input cost changes takes time indicating "additional stickiness" at the last stage of processing
The determinants of price rigidity in the UK: Analysis of the CPI and PPI microdata and application to macrodata modelling
This paper investigates price rigidity in UK consumer and producer markets, by estimating the hazard functions of price changes in microdata which are then used in macrodata modelling. We explore the mechanism of price setting using survival analysis in order to see what factors drive the observed price rigidity. We find significant effects of macroeconomic variables such as inflation and output, which should be purged off before calibrating any macroeconomic models. The microdata findings are then used to estimate and simulate a heterogeneous price setting model (generalised Calvo and Taylor), which improves the performance in matching macrodata persistence
The impacts of Information and Communications Technology (ICT) and E-commerce on bilateral trade flows
This study examines the impact of Internet and e-commerce adoption on bilateral trade flows using a panel of 21 developing- and least-developed countries and 30 OECD countries. Given the commitment of East African Community (EAC) to become the frontrunner in export-led economy across the African continent, special attention is dedicated to analyse the role of ICT and e-commerce on EAC’s export performance. The empirical results indicate that better access to the modern ICT and adoption of e-commerce applications stimulate bilateral trade flows at various levels. The study notes that the efficient use of ICT equipped with high speed internet and secured servers is a crucial milestone for unlocking the e-trade potentials for developing- and least-developed counties
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