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Time or State Dependent Price Setting Rules? Evidence from Portuguese Micro Data

Authors 
J.M.C.Santos Silva
Daniel Dias
Publication Year 
2005
JEL Code 
C41 - Duration Analysis
D40 - General
E31 - Price Level; Inflation; Deflation
Abstract 
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 di.ers for negative and positive values of these covariates.
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Published as 
Time or State Dependent Price Setting Rules? Evidence from Micro Data
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