CHOOSING BETWEEN TIME AND STATE DEPENDENCE MICRO EVIDENCE ON FIRMS’ PRICE-REVIEWING STRATEGIES
WO R K I N G PA P E R S E R I E S
N O 13 0 5 / M A R C H 2011
WAGE DYNAMICS NETWORK
CHOOSING BETWEEN TIME AND STATE DEPENDENCE MICRO EVIDENCE ON FIRMS’ PRICE-REVIEWING STRATEGIES1
by Daniel A. Dias2, Carlos Robalo Marques3 and Fernando Martins4
NOTE: This WorkingPaper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.
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1 We would like to thank Nuno Alves, Mário Centeno, Ana Cristina Leal and João Sousa for helpful discussions and useful suggestions. The opinions expressed in this paper are those of the authors and do not necessarily coincide with those of Banco de Portugal or the Eurosystem. Any errors or omissions are the sole responsibility of the authors. 2 Departmentof Economics, University of Illinois at Urbana-Champaign and CEMAPRE; e-mail: email@example.com 3 Banco de Portugal (Research Department); e-mail: firstname.lastname@example.org 4 Banco de Portugal (Research Department), ISEG (Technical University of Lisbon) and Universidade Lusíada de Lisboa; e-mail: email@example.com
Wage Dynamics Network
This paper contains research conducted within the WageDynamics Network (WDN). The WDN is a research network consisting of economists from the European Central Bank (ECB) and the national central banks (NCBs) of the EU countries. The WDN aims at studying in depth the features and sources of wage and labour cost dynamics and their implications for monetary policy. The specific objectives of the network are: i) identifying the sources and features ofwage and labour cost dynamics that are most relevant for monetary policy and ii) clarifying the relationship between wages, labour costs and prices both at the firm and macro-economic level. The WDN is chaired by Frank Smets (ECB). Giuseppe Bertola (Università di Torino) and Julián Messina (World Bank and University of Girona) act as external consultants and Ana Lamo (ECB) as Secretary. Therefereeing process of this paper has been co-ordinated by a team composed of Gabriel Fagan (ECB, chairperson), Philip Vermeulen (ECB), Giuseppe Bertola, Julián Messina, Jan Babecký (CNB), Hervé Le Bihan (Banque de France) and Thomas Mathä (Banque centrale du Luxembourg). The paper is released in order to make the results of WDN research generally available, in preliminary form, to encourage comments andsuggestions prior to final publication. The views expressed in the paper are the author’s own and do not necessarily reflect those of the ESCB.
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Abstract Non-technical summary 1 Introduction 2 Theoretical background 3 The Data 3.1 Data sources 3.2 Preliminary data analysis 4 An econometric model for the price-reviewing strategies 5 Conclusions Appendix References 4 5 7 10 15 15 17 21 29 31 34
ECB Working Paper Series No 1305 March 2011
Abstract Thanks to recent ﬁndings based...