Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 22/2016: Intermittent Price Changes in Production Plants: Empirical Evidence using Monthly Data

Øivind A. Nilsen () and Magne Vange ()
Additional contact information
Øivind A. Nilsen: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Magne Vange: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: The price-setting behaviour of manufacturing plants is examined using a large panel of monthly surveyed plant- and product-specific prices. The sample shows a high frequency of zero changes, relatively small price changes, and a strong seasonal price change pattern. The intermittent feature of price changes is modelled with thresholds which are lower in January, and a quadratic loss–function associated with the distance from target price. The findings show statistically significant pricing thresholds, which are only two thirds in January, and partial adjustment parameters implying that 60% of the deviation between the target price and current price is closed each month.

Keywords: Price Setting; Micro Data; Simulated Method of Moments

JEL-codes: E30; E31; E37

41 pages, December 23, 2016

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