By Ian Small, and Tony Yates of the Bank’s Monetary Assessment and Strategy Division.
This article uses the Bank’s price-setting survey to investigate what might make prices more or less sticky. It discusses the impact of competition; whether price changes are prompted by cost or demand shocks; if price stickiness is related to the characteristics of firm’s customers; whether price changes vary if goods are sold abroad or into the domestic market; and, finally, whether prices are more sticky downwards than upwards. The article finds that all of these factors appear to influence how sticky firms say their prices are.
What makes prices sticky? Some survey evidence for the United Kingdom