IDEAS home Printed from https://ideas.repec.org/p/cep/cepops/55.html
   My bibliography  Save this paper

Prices and inflation in the UK - A new dataset

Author

Listed:
  • Richard Davies

Abstract

This paper presents a new dataset of 41 million UK consumer prices, providing facts on the frequency, size and timing of price changes between 1988 and 2020. The micro data are the 'price quotes' of individual consumer products that make up the official Consumer Prices Index (CPI) for the UK. Prices are recorded between January 1988 and December 2020 and cover a wide-ranging selection of items including food and drink, homewares, furniture and appliances, motoring supplies and fuels as well as a range of services. The extended time coverage allows a comparison of historic shocks, including the ERM crisis, 2008 financial crash and 2016 EU referendum, with the Coronavirus pandemic. The long-run facts fit closely with the pattern of nominal rigidities seen in other countries. Overall, state-dependent rather than time-dependent pricing models are consistent with UK firm behaviour, and the data show strong support for the notion that prices are 'volatile while anchored' as in the more recent menu cost models. The facts show the extraordinary experience of 2020, which was the most volatile year, in terms of pricing, since at least 1991.

Suggested Citation

  • Richard Davies, 2021. "Prices and inflation in the UK - A new dataset," CEP Occasional Papers 55, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepops:55
    as

    Download full text from publisher

    File URL: https://cep.lse.ac.uk/pubs/download/occasional/op055.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kehoe, Patrick & Midrigan, Virgiliu, 2015. "Prices are sticky after all," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 35-53.
    2. Taylor, J.B., 2016. "The Staying Power of Staggered Wage and Price Setting Models in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2009-2042, Elsevier.
    3. Fabiani, S. & Druant, M. & Hernando, I. & Kwapil, C. & Landau, B. & Loupias, C. & Martins, F. & Mathä, T. & Sabbatini, R. & Stahl, H. & Stockman, A., 2005. "The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence," Working papers 135, Banque de France.
    4. Oleksiy Kryvtsov & Virgiliu Midrigan, 2013. "Inventories, Markups, and Real Rigidities in Menu Cost Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(1), pages 249-276.
    5. Virgiliu Midrigan, 2011. "Menu Costs, Multiproduct Firms, and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(4), pages 1139-1180, July.
    6. Frederick C. Mills, 1927. "Introduction to "The Behavior of Prices"," NBER Chapters, in: The Behavior of Prices, pages 31-36, National Bureau of Economic Research, Inc.
    7. Jessie Handbury & Tsutomu Watanabe & David E. Weinstein, 2013. "How Much Do Official Price Indexes Tell Us about Inflation?," NBER Working Papers 19504, National Bureau of Economic Research, Inc.
    8. Knotek, Edward S., 2024. "The roles of price points and menu costs in price rigidity," Journal of Monetary Economics, Elsevier, vol. 145(C).
    9. Alberto Cavallo & Roberto Rigobon, 2016. "The Billion Prices Project: Using Online Prices for Measurement and Research," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 151-178, Spring.
    10. Bart Hobijn & Federico Ravenna & Andrea Tambalotti, 2006. "Menu Costs at Work: Restaurant Prices and the Introduction of the Euro," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(3), pages 1103-1131.
    11. Brynjolfsson, Erik & Collis, Avinash & Diewert, W. Erwin & Eggers, Felix & Fox, Kevin J., 2019. "GDP-B: Accounting for the Value of New and Free Goods in the Digital Economy," OSF Preprints sptfu, Center for Open Science.
    12. Greg Kaplan & Guido Menzio, 2015. "The Morphology Of Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 1165-1206, November.
    13. Klenow, Peter J. & Malin, Benjamin A., 2010. "Microeconomic Evidence on Price-Setting," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 6, pages 231-284, Elsevier.
    14. Laurence Ball & Sandeep Mazumder, 2011. "Inflation Dynamics and the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 337-405.
    15. Silvia Fabiani & Martine Druant & Ignacio Hernando & Claudia Kwapil & Bettina Landau & Claire Loupias & Fernando Martins & Thomas Mathä & Roberto Sabbatini & Harald Stahl & Ad Stokman, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
    16. Martin Bodenstein & James Hebden & Fabian Winkler, 2019. "Learning and Misperception: Implications for Price-Level Targeting," Finance and Economics Discussion Series 2019-078, Board of Governors of the Federal Reserve System (U.S.).
    17. Oleksiy Kryvtsov & Nicolas Vincent, 2014. "On the Importance of Sales for Aggregate Price Flexibility," Staff Working Papers 14-45, Bank of Canada.
    18. Eytan Sheshinski & Yoram Weiss, 1977. "Inflation and Costs of Price Adjustment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(2), pages 287-303.
    19. Emi Nakamura & Jón Steinsson, 2012. "Lost in Transit: Product Replacement Bias and Pricing to Market," American Economic Review, American Economic Association, vol. 102(7), pages 3277-3316, December.
    20. Davies, Richard & Richardson, Peter & Katinaite, Vaiva & Manning, Mark, 2010. "Evolution of the UK banking system," Bank of England Quarterly Bulletin, Bank of England, vol. 50(4), pages 321-332.
    21. Etienne Gagnon, 2009. "Price Setting during Low and High Inflation: Evidence from Mexico," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 1221-1263.
    22. Rui Costa & Stephen Machin, 2017. "Real Wages and Living Standards in the UK," CEP Election Analysis Papers 036, Centre for Economic Performance, LSE.
    23. Fabiani, Silvia & Loupias, Claire & Martins, Fernando & Sabbatini, Roberto (ed.), 2007. "Pricing Decisions in the Euro Area: How Firms Set Prices and Why," OUP Catalogue, Oxford University Press, number 9780195309287.
    24. Burstein, Ariel T., 2006. "Inflation and output dynamics with state-dependent pricing decisions," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1235-1257, October.
    25. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
    26. Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April.
    27. Mussa, Michael, 1981. "Sticky Prices and Disequilibrium Adjustment in a Rational Model of the Inflationary Process," American Economic Review, American Economic Association, vol. 71(5), pages 1020-1027, December.
    28. Frederick C. Mills, 1927. "The Behavior of Prices," NBER Books, National Bureau of Economic Research, Inc, number mill27-1.
    29. Frederick C. Mills, 1927. "Appendix to "The Behavior of Prices"," NBER Chapters, in: The Behavior of Prices, pages 441-586, National Bureau of Economic Research, Inc.
    30. Jaravel, Xavier & O'Connell, Martin, 2020. "Real-time price indices: Inflation spike and falling product variety during the Great Lockdown," Journal of Public Economics, Elsevier, vol. 191(C).
    31. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1415-1464.
    32. Cobham, David, 1997. "The Post-ERM Framework for Monetary Policy in the United Kingdom: Bounded Credibility," Economic Journal, Royal Economic Society, vol. 107(443), pages 1128-1141, July.
    33. Ba M. Chu & Kim Huynh & David T. Jacho-Chávez & Oleksiy Kryvtsov, 2018. "On the Evolution of the United Kingdom Price Distributions," Staff Working Papers 18-25, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bakker, Jan David & Datta, Nikhil & Davies, Richard & De Lyon, Josh, 2023. "Did the policy response to the energy crisis cause crime? Evidence from England," CAGE Online Working Paper Series 663, Competitive Advantage in the Global Economy (CAGE).
    2. Chen, Haixia & Le, Vo Phuong Mai & Meenagh, David & Minford, Patrick, 2023. "UK Monetary Policy in An Estimated DSGE Model with State-Dependent Price and Wage Contracts," Cardiff Economics Working Papers E2023/22, Cardiff University, Cardiff Business School, Economics Section.
    3. Bakker, Jan & Datta, Nikhil & Davies, Richard & De Lyon, Joshua, 2022. "Non-tariff barriers and consumer prices: evidence from Brexit," LSE Research Online Documents on Economics 118040, London School of Economics and Political Science, LSE Library.
    4. Bakker, Jan David & Datta, Nikhil & Davies, Richard & De Lyon, Josh, 2023. "Brexit and consumer food prices," The Warwick Economics Research Paper Series (TWERPS) 1461, University of Warwick, Department of Economics.
    5. Jan David Bakker & Nikhil Datta & Richard Davies & Josh De Lyon, 2022. "Non-tariff barriers and consumer prices: evidence from Brexit," CEP Discussion Papers dp1888, Centre for Economic Performance, LSE.
    6. Engin Kara & Ahmed Pirzada, 2023. "Unraveling the Impact of Higher Uncertainty on Profits and Inflation," CESifo Working Paper Series 10587, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Klenow, Peter J. & Malin, Benjamin A., 2010. "Microeconomic Evidence on Price-Setting," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 6, pages 231-284, Elsevier.
    2. Emi Nakamura & Jón Steinsson, 2013. "Price Rigidity: Microeconomic Evidence and Macroeconomic Implications," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 133-163, May.
    3. Franz Ruch & Neil Rankin & Stan du Plessis, 2016. "Decomposing inflation using micropricelevel data South Africas pricing dynamics," Working Papers 7353, South African Reserve Bank.
    4. Pinelopi Goldberg & Rebecca Hellerstein, 2009. "How Rigid Are Producer Prices?," Working Papers 1184, Princeton University, Department of Economics, Center for Economic Policy Studies..
    5. Hobijn, Bart & Nechio, Fernanda & Shapiro, Adam Hale, 2021. "Using Brexit to identify the nature of price rigidities," Journal of International Economics, Elsevier, vol. 130(C).
    6. Emi Nakamura & Jón Steinsson & Patrick Sun & Daniel Villar, 2018. "The Elusive Costs of Inflation: Price Dispersion during the U.S. Great Inflation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(4), pages 1933-1980.
    7. Sheremirov, Viacheslav, 2020. "Price dispersion and inflation: New facts and theoretical implications," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 59-70.
    8. Dhyne, Emmanuel & Fuss, Catherine & Pesaran, M. Hashem & Sevestre, Patrick, 2011. "Lumpy Price Adjustments: A Microeconometric Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(4), pages 529-540.
    9. Daniel Levy & Dongwon Lee & Haipeng (Allan) Chen & Robert J. Kauffman & Mark Bergen, 2011. "Price Points and Price Rigidity," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1417-1431, November.
    10. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1415-1464.
    11. Alvarez González, Luis Julián, 2008. "What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-36.
    12. Bartosz Mackowiak & Frank Smets, 2008. "On implications of micro price data for macro models," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
    13. Etienne Gagnon & David López-Salido & Nicolas Vincent, 2013. "Individual Price Adjustment along the Extensive Margin," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 235-281.
    14. Maarten Dossche, 2009. "Understanding Inflation Dynamics.Where Do We Stand?," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(2), pages 209-227.
    15. Levy, Daniel & Snir, Avichai & Gotler, Alex & Chen, Haipeng (Allan), 2020. "Not all price endings are created equal: Price points and asymmetric price rigidity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
    16. Caballero, Ricardo J. & Engel, Eduardo M.R.A., 2007. "Price stickiness in Ss models: New interpretations of old results," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 100-121, September.
    17. Nicoletta Berardi & Erwan Gautier & Hervé Le Bihan, 2015. "More Facts about Prices: France Before and During the Great Recession," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(8), pages 1465-1502, December.
    18. Lein, Sarah M., 2010. "When do firms adjust prices? Evidence from micro panel data," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 696-715, September.
    19. Stéphane Dupraz, 2024. "A Kinked‐Demand Theory of Price Rigidity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(2-3), pages 325-363, March.
    20. Emmanuel Dhyne & Jerzy Konieczny & Fabio Rumler & Patrick Sevestre, 2009. "Price rigidity in the euro area - An assessment," European Economy - Economic Papers 2008 - 2015 380, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    More about this item

    Keywords

    EU referendum; covid-19; consumer prices; inflation;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:cepops:55. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://cep.lse.ac.uk/_new/publications/occasional-papers/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.