Rigidities and adjustments of daily prices to costs: Evidence from supermarket data

Produced by: 
Universidad de Chile
Available from: 
January 2019
Paper author(s): 
Monica Giulietti
Jesus Otero
Michael Waterson
Poverty - Inequality - Aid Effectiveness

We assess the extent of inertia in grocery retail prices using data on prices and costs from a large supermarket chain in Colombia. Relative to previous work our analysis benefits from the daily frequency of the data and the availability of reliable replacement cost data. We uncover evidence supporting the existence of significant nominal rigidities in reference prices (three months) and even more so in reference costs (about five months). There is evidence that the price and cost rigidities differ depending on the type of product, being on average smaller in the case of perishable goods. Using an Error Correction Model framework, we examine the path of prices relative to costs, to determine the speed of adjustment of prices to shocks.


Research section: 
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