The Price Setting Behavior in Colombia: Evidence from PPI Micro Data
The series Working Papers on Economics is published by the Office for Economic Studies at the Banco de la República (Central Bank of Colombia). The works published are provisional, and their authors are fully responsible for the opinions expressed in them, as well as for possible mistakes. The opinions expressed herein are those of the authors and do not necessarily reflect the views of Banco de la República or its Board of Directors.
In this paper we explore the price setting behavior of Colombian producers and importers using a unique database containing the monthly price reports underlying the Colombian PPI from Jun-1999 to Oct-2006. We focus on five particular questions:
- Are prices sticky or flexible?
- Is a price increase more likely than a decrease?
- Are price changes synchronized?
- Is the pricing rule state or time dependent?
- 5. Are price changes sizable?
Answers to these questions provide some of the micro fundamentals for the design of monetary policy in this country.
