State-dependent or time-dependent pricing? New evidence from a monthly firm-level survey: 1980-2017

Dixon, Huw D. ORCID: https://orcid.org/0000-0002-9875-8965 and Grimme, Christian 2022. State-dependent or time-dependent pricing? New evidence from a monthly firm-level survey: 1980-2017. European Economic Review 150 , 104319. 10.1016/j.euroecorev.2022.104319

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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 support the notion that theoretical models should integrate both time and state dependence.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	1427-1488
Date of First Compliant Deposit:	21 October 2022
Date of Acceptance:	16 September 2022
Last Modified:	03 Jul 2023 16:30
URI:	https://orca.cardiff.ac.uk/id/eprint/153652

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