Price-Setting Behavior in Brazil: survey evidence

Produced by: 
Banco Central do Brasil
Available from: 
March 2016
Paper author(s): 
Arnildo da Silva Correa
Myrian Beatriz S. Petrassi
Rafael Santos
Topic: 
Financial Economics
Macroeconomics - Economic growth - Monetary Policy
Year: 
2016

Price surveys became popular after the seminal work of Blinder (1991) exploring the price-setting practices of the US firms, which filled some blanks left by the simple observation of prices charged by firms. The present paper reports the findings of a survey conducted by the Central Bank of Brazil with local firms. The sample covered 7,002 firms, the entire country and 3 economic sectors: manufacturing, services and commerce. The collected answers suggest important features about price-setting behaviour in Brazil, such as: (i) the cost of reviewing price are low, but there is important nominal rigidity - firms report that change prices 3.6 times per year - , (ii) state-dependent rules seem to be more frequent than time-dependent behaviour, (iii) markup pricing appears to be the dominant strategy, and (iv) the two most important factors driving price changes are the cost of intermediate goods and the inflation rate. A complete description of the results is found throughout the paper and summarized in the final section. The paper also discusses some policy implications from the results.

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