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Intermittent Price Changes in Production Plants: Empirical Evidence Using Monthly Data
Author(s) -
Nilsen Øivind A.,
Vange Magne
Publication year - 2019
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12255
Subject(s) - econometrics , economics , production (economics) , price level , producer price index , quadratic equation , product (mathematics) , price setting , statistics , mathematics , mid price , monetary economics , microeconomics , geometry
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 smaller in January, and a quadratic loss function associated with the distance from the 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 the current price is closed each month.