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Consumer price rigidity in periods of low and high inflation: the case of Lithuania

Author

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  • Valentin Jouvanceau

    (Bank of Lithuania)

Abstract

I provide new monthly statistics on consumer price rigidity in Lithuania. The statistics are derived from CPI price records, covering an average of 90% of the ECOICOP4 weights between 2019 and 2023. Through a comparative study of two distinct periods – low inflation from January 2019 to December 2020, and high inflation from January 2021 to March 2023 – a significant shift in the frequency of price changes is observed in the latter period. This shift is mainly due to a significant rise in the frequency of price increases, while the average size of these increases has remained relatively constant over the years. Furthermore, I show that structural aggregate demand and energy shocks induced shifts in the frequency of price changes during the high-inflation period, suggesting that state-dependent sticky price models may be more suitable than time dependent ones for explaining inflation fluctuations in Lithuania.

Suggested Citation

  • Valentin Jouvanceau, 2023. "Consumer price rigidity in periods of low and high inflation: the case of Lithuania," Bank of Lithuania Discussion Paper Series 34, Bank of Lithuania.
    • Handle: RePEc:lie:dpaper:34
    as

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    More about this item

    Keywords

    consumer price rigidity; price-setting; high inflation; frequency of price changes;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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