The Effects of Price Endings on Price Rigidity: Evidence from VAT Changes
Speaker
Avichai Snir
Date
25/04/2022 - 11:30 - 10:30Add To Calendar
2022-04-25 10:30:00
2022-04-25 11:30:00
The Effects of Price Endings on Price Rigidity: Evidence from VAT Changes
Micro price data underlying the CPI in Israel reveal that most stores have a favored price
ending—a final digit to the right of the decimal, usually zero or nine, used for a large majority of
prices. Using VAT rate changes as exogenous shocks that affect prices regardless of their ending
digit, we find that the frequency of adjustment for nonfavored price endings increases by twice
as much as the frequency of adjustment for favored endings, consistent with favored endings
playing a causal role in generating price rigidity. In the aggregate, favored endings produce
sluggish pass-through of VAT rate changes.
Seminar Room, ground floor, building 504
אוניברסיטת בר-אילן - Department of Economics
Economics.Dept@mail.biu.ac.il
Asia/Jerusalem
public
Place
Seminar Room, ground floor, building 504
Affiliation
Netanya Academic College
Abstract
Micro price data underlying the CPI in Israel reveal that most stores have a favored price
ending—a final digit to the right of the decimal, usually zero or nine, used for a large majority of
prices. Using VAT rate changes as exogenous shocks that affect prices regardless of their ending
digit, we find that the frequency of adjustment for nonfavored price endings increases by twice
as much as the frequency of adjustment for favored endings, consistent with favored endings
playing a causal role in generating price rigidity. In the aggregate, favored endings produce
sluggish pass-through of VAT rate changes.
Attached file
Last Updated Date : 15/05/2022
