Pricing Behavior Indicators and the Factors Affecting It: Evidence from Refah Stores’ Price Microdata

Price stickiness, measured by indicators like frequency and duration of price changes, determines the short-term real effects of monetary policy in the economy. Discovering the factors affecting price adjustment allows the monetary policymaker to predict the changes in pricing behavior by monitoring the changes of these influential factors. Employing microdata of 84 million monthly price observations from the Refah chain stores in Iran shows that on average, goods’ prices did not last more than 2.52 months and the price of at least 47.34 percent of examined goods changed every month, meaning that the price stickiness is pretty weak in Iran’s economy and there is a little room for the monetary authority to influence the real economy. Moreover, as regards the factors affecting the price-setting behaviors, the results show that the frequency of price changes has a positive threshold correlation with the inflation rate; As the inflation crosses 18%, the intensity of this positive effect decreases. It is important to note that inflation is not the only factor explaining the pricing behavior, but the growth rate of liquidity, GDP and exchange rate also have significant positive effects on the frequency and magnitude of price changes.