Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250326 
Year of Publication: 
2021
Series/Report no.: 
Cardiff Economics Working Papers No. E2021/1
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
Abstract: 
We examine the relative importance of time and state dependence in the price-setting decisions of firms using a monthly panel of German firms over the period 1980-2017. We propose a refined version of time dependence by introducing different hazard functions for price increases and decreases. We find three sets of results. First, time dependence is much more important for price setting than what the previous literature has found. Second, price decreases can be well explained by time dependence alone. Price increases are best predicted by the interaction of time-dependent and firm-specific state factors. Third, time dependence for price increases and decreases look completely different from each other. Our empirical results suggest that theoretical models should integrate both time and state dependence rather than developing the approaches separately.
Subjects: 
Survey Data
Price Setting
Extensive Margin
State-Dependent Pricing
Time-Dependent Pricing
JEL: 
E30
E31
E32
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.