Erschienen in:Bank of Italy Occasional Paper ; No. 733
Umfang:
1 Online-Ressource (45 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.4289771
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 30, 2022 erstellt
Beschreibung:
Using a rich survey panel dataset of Italian businesses, this paper provides new empirical evidence on the drivers of firms' pricing decisions over the last six years. We document a set of interesting results. First, the share of firms adjusting their prices in each period co-moves with current inflation. Moreover, firms' choices are consistent with a hybrid framework that lies between time- and state-dependent models of price setting. Second, firms' pricing decisions respond to past pricing choices, changes in input costs and beliefs about future developments of their own prices, rather than on expectations for aggregate inflation. Third, firms' price changes are also connected to their observable characteristics: size class, sector of activity and exposure to foreign markets. Fourth, the heterogeneity in price changes depends strongly on the dispersion of beliefs concerning future price variations, while input prices only explain a limited part. Our results shed light on the presence of different channels for the formation of firms' prices, pointing toward the need to consider the channels together so as to understand firms' pricing decisions and inflation developments