Monday, July 25, 2016

Price-Setting Behavior in Brazil: survey evidence

Arnildo da Silva Correa ; Myrian Beatriz S. Petrassi ; and Rafael Santos have posted Price-Setting Behavior in Brazil: survey evidence.

ABSTRACT: Price surveys became popular after the seminal work of Blinder (1991) exploring the price-setting practices of the US firms, which filled some blanks left by the simple observation of prices charged by firms. The present paper reports the findings of a survey conducted by the Central Bank of Brazil with local firms. The sample covered 7,002 firms, the entire country and 3 economic sectors: manufacturing, services and commerce. The collected answers suggest important features about price-setting behavior in Brazil, such as: (i) the cost of reviewing price are low, but there is important nominal rigidity – firms report that change prices 3.6 times per year –, (ii) state-dependent rules seem to be more frequent than time-dependent behavior, (iii) markup pricing appears to be the dominant strategy, and (iv) the two most important factors driving price changes are the cost of intermediate goods and the inflation rate. A complete description of the results ! is found throughout the paper and summarized in the final section. The paper also discusses some policy implications from the results

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