PRICE SETTING PRACTICES IN GREECE: EVIDENCE FROM A SMALL-SCALE FIRM-LEVEL SURVEY

What is it about?

How frequently are prices adjusted in normal times? How speedily are prices adjusted as a reaction to lower demand or increase in production costs? Does competition have a role to play? Evidence from a sample of 400 or so Greek firms suggests that prices adjust faster in response to an increase in costs rather than to a slowdown in demand. Product market competition has a role to play in explaining differences amongs sectors in the speed of price adjustment.

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Why is it important?

Micro-level evidence on price setting practices of firms in Greece is scarce. The role product market competition is found to have in price setting could explain inflation inertia in Greece in the first stages of the recent crisis.