Publications

2023

1. Price setting on the two sides of the Atlantic-Evidence from supermarket scanner data

   Peter Karadi, Juergen Amann, Javier Sánchez Bachiller, Pascal Seiler, and Jesse Wursten

   Journal of Monetary Economics, 2023

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   We compare supermarket price setting in the US and the euro area and assess its impact on food inflation. We introduce a novel scanner dataset of Germany, the Netherlands, France, and Italy (EA4) and contrast it with an equivalent dataset from the US. We find that both higher frequency and stronger state dependence of price changes contribute to higher flexibility of supermarket inflation in the US relative to the euro area. We argue that the driving force behind both factors is higher cross-sectional volatility in the US. Larger product-level fluctuations both force retailers to adjust prices more frequently and increase price misalignments, which increase the selection of large price changes. Both facts are well represented by a mildly state-dependent price-setting model, and they jointly explain over a third of the difference in food-inflation volatility between the US and the euro area as well as around a third of the difference between the inflation responses to the COVID-19 shock in Germany and Italy.

   @article{karadi2023price,
     title = {Price setting on the two sides of the Atlantic-Evidence from supermarket scanner data},
     author = {Karadi, Peter and Amann, Juergen and Bachiller, Javier S{\'a}nchez and Seiler, Pascal and Wursten, Jesse},
     journal = {Journal of Monetary Economics},
     volume = {140},
     pages = {S1--S17},
     year = {2023},
     publisher = {Elsevier},
   }

2. Price adjustment in the euro area in the low-inflation period: evidence from consumer and producer micro price data

   Erwan Gautier, Peter Karadi, Juergen Amann, Cristina Conflitti, Riemer P Faber, and 20 more authors

   ECB Occasional papers, 2023

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   This paper documents five stylised facts relating to price adjustment in the euro area, using various micro price datasets collected in a period with relatively low and stable inflation. First, price changes are infrequent in the core sectors. On average, 12% of consumer prices change each month, falling to 8.5% when sales prices are excluded. The frequency of producer price adjustment is greater (25%), reflecting that the prices of intermediate goods and energy are more flexible. For both consumer and producer prices, cross-sectoral heterogeneity is more pronounced than cross-country heterogeneity. Second, price changes tend to be large and heterogeneous. For consumer prices, the typical absolute price change is about 10%, and the distribution of price changes shows a broad dispersion. For producer prices, the typical absolute price change is smaller, but nevertheless larger than inflation. Third, price setting is mildly state-dependent: the probability of price adjustment rises with the size of price misalignment, mainly reflecting idiosyncratic shocks, but it does not increase very sharply. Fourth, for both consumer and producer prices, the repricing rate showed no trend in the period 2005-19 but was more volatile in the short run. Fifth, small cyclical variations in frequency did not contribute much to fluctuations in aggregate inflation, which instead mainly reflected shifts in the average size of price changes. Consistent with idiosyncratic shocks as the main driver of price changes, aggregate disturbances affected inflation by shifting the relative number of firms increasing or decreasing their prices, rather than the size of price increases and decreases.

   @article{gautier2023price,
     title = {Price adjustment in the euro area in the low-inflation period: evidence from consumer and producer micro price data},
     author = {Gautier, Erwan and Karadi, Peter and Amann, Juergen and Conflitti, Cristina and Faber, Riemer P and Fabo, Brian and Fadejeva, Ludmila and Fuss, Catherine and Kosma, Theodora and Jouvanceau, Valentin and Martins, Fernando and Menz, Jan-Oliver and Messner, Teresa and Petroulas, Pavlos and Roldán-Blanco, Pau and Rumler, Fabio and Sánchez Bachiller, Javier and Santoro, Sergio and Seward, Domingos and Stanga, Irina and de Veirman, Emmanuel and Wieland, Elisabeth and Wintr, Ladislav and Wursten, Jesse and Zimmer, Helene},
     journal = {ECB Occasional papers},
     year = {2023},
   }