Économie et Statistique n° 460-461 Individual adjustments of consumer prices in France (2003-2011) - The impact locally of fixed radar speed cameras on road accidents - Environmental micro-evaluation

Economie et Statistique
Paru le : 21/11/2013
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Individual adjustments of consumer prices in France: new results for the period 2003-2011

Nicoletta Berardi, Erwan Gautier et Hervé Le Bihan

How and at what speed do prices adjust? This study looks at this question using individual consumer prices in France, bringing out some new facts and shedding light on the dynamics of inflation. Every month, on average, about 17% of prices change. The average price change is in the order of 10%. Small changes, of less than 1%, represent one tenth of all changes that are made. Sales and special offers play an important part but less so than in the United States: in France 17% of price changes are linked with sales or special offers compared with 30% in the United States. The introduction of the law to modernise the economy in France (LME) has had little effect on this difference. Finally, a large proportion of price changes occur when products are replaced. The individual price readings serve to separate extensive and intensive margins of variations in inflation, resulting respectively from the frequency and scale of price changes, and also determine the contribution of sales and the introduction of product replacements. Variations in average price rises and reductions linked with sales and special offers have a strong effect on the volatility of monthly inflation. Once sales and special offers are taken out of the picture, the variability of inflation correlates better with that of the frequency of price increases and reductions. Product replacements make little contribution to monthly variations in inflation but they do have a positive effect on the monthly average. The peak in price changes in January (especially price rises) also has a significant effect on average inflation levels. Despite the scale of the recent economic crisis, the behaviour of price adjustments has changed little: the frequency of price reductions has increased slightly while the scale of price changes has decreased slightly.

Economie et Statistique
No 460-461
Paru le : 21/11/2013