Working Paper Series no. 160: The Behaviour of Producer Prices: some Evidence from the French PPI Micro Data

Abstract

This paper provides some new empirical features on price setting behaviour for French producers using micro data underlying the producer and business-services price indices over the period 1994-2005. Some crucial methodological issues on the collection of producer prices are raised. Then, the main features of producers' price setting are presented: producer prices are modified quite frequently and by small amounts. A high heterogeneity across sectors is also observed: business-services prices change less often than industrial producer prices. The data lend some support to predictions of both time- and state-dependence models: Taylor contracts are not unusual but prices also respond to the changes in the firm's economic conditions. Nevertheless, time-dependent models are shown to be the most relevant theories to explain the producer price rigidity.

Erwan Gautier
December 2006

Classification JEL : E31, D43, L11, L16.

Keywords : Price stickiness, price duration, producer price index, frequency of price change.