Scandinavian Working Papers in Economics

Nationaløkonomisk tidsskrift,
Nationaløkonomisk Forening

Price Setting Behaviour in Denmark - A Study of CPI Micro Data 1997-2005

2007, Volume 2007, issue 1, pp. 29-58

Bo William Hansen () and Niels Lynggård Hansen ()
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Bo William Hansen: Danmarks Nationalbank
Niels Lynggård Hansen: Danmarks Nationalbank

Abstract: This paper provides empirical evidence on the degree rigidity and price flexibility in Denmark. We use unpublished data from Statistics Denmark on the Danish CPI. The dataset covers the period 1997-2005 and contains around 2.7 million monthly price records. The paper reveals a substantial amount of heterogeneity in the frequency and size of price adjustments across sectors and products. Most price changes are increases, but price decreases are not uncommon. Price changes are genreally sizeable compared to aggregate and sectoral inflation rates. We explore how these features are affected by, e.g., seasonality and the level of inflation. Our evidence emphasises the importance of price stickiness and supports the existence of both time and statedependent pricing strategies.

Keywords: economy; prices

JEL-codes: A10

Language: English

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