Price setting behaviour in Spain: Evidence from consumer price micro-data

This paper analyses the price setting behaviour of Spanish firms, using a large dataset that contains over 1.1 million price records. It identifies differences in the frequency and size of price adjustments across types of products and explores how these general features are affected by specific factors: seasonality, the level of inflation, changes in indirect taxation and the use of attractive pricing. We find that prices do not change often, but do so by a large amount, and there is a marked heterogeneity across products. Moreover, the high frequency of price reductions suggests that there is no strong downward rigidity. (c) 2006 Elsevier B.V. All rights reserved.