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Price Setting in Retailing: the Case of Uruguay

Borraz, Fernando and Zipitría, Leandro (2010): Price Setting in Retailing: the Case of Uruguay.

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Abstract

We use a rich and unique dataset of 30 million daily prices in groceries and supermarkets across the country to analyze stylized facts of the behaviour of consumer prices. Our findings are as follows: i) The median duration of prices is two months and half. Therefore, retail prices in Uruguay are less sticky than in the US, Brazil and Chile, but stickier than in the UK. ii) We do not find evidence of a seasonal pattern in the likelihood of price adjustments. iii) The frequency of price adjustment is only correlated with expected inflation for the personal care product category. However, for the food category we find that firms changes the percentage points of the adjustment and not their frequency. iv) The probability of price change in the first day of the month is nine times higher than in any another day. v) The probability of a price change is not constant over time. Therefore, the evidence presented in this paper indicates that price stickiness in Uruguay is low, in consequence there are doubts regarding the effectiveness of monetary policy.

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