Price changes by firms in New Zealand - some evidence from the Quarterly Survey of Business Opinion

Release date
01/09/2007
Reference
Vol. 70. No. 3. September 2007
Authors
Andrew Coleman; Brian Silverstone
In the last decade, central banks have conducted new research enhancing their understanding of firm-level price-setting behaviour. This work has revealed new information about the frequency with which firms change prices and provided explanations as to why prices are sticky. This information could potentially improve monetary policymaking and, as a result, reduce the real costs of policy changes and non-policy shocks. This article outlines the major themes and results from selected international research. It then examines price changing behaviour in New Zealand using firm-level data from the Quarterly Survey of Business Opinion (QSBO) published by the New Zealand Institute of Economic Research (NZIER). In line with international research, we find considerable diversity in the frequency of price changes by firms. Moreover, firms change prices more in response to cost changes than demand changes, and more in response to falling demand than increasing demand.