Title: Rigidities and adjustments of daily prices to costs: Evidence from supermarket data
Authors: Jesus Otero - Universidad del Rosario (Colombia) [presenting]
Monica Giulietti - University of Loughborough (United Kingdom)
Michael Waterson - University of Warwick (United Kingdom)
Abstract: The extent of inertia in grocery retail prices is assessed by using data on prices and costs from a large supermarket chain in Colombia. Relative to previous work, we benefit from the daily frequency of the data, the availability of reliable replacement cost data and the wide variety of products. The data supports the existence of significant nominal rigidities in reference prices (three months) and even more so in reference costs (about five months). 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, we examine the path of prices relative to costs, to determine the speed of adjustment of prices to shocks, finding significant mean reversion but also uncovering asymmetries in response to upward and downward movements in margins in many cases.