Understanding the Firm-Level Price-Setting Behaviour: The Developed Countries Experiences and Instructions for Serbia

It is important for central banks to understand how firms set prices. The pricesetting behaviour plays a key role in the monetary policy transmission mechanism. To be able to understand and predict how monetary policy impacts on macro variables such as output, employment and inflation, it is useful to have information on what lies behind the choices made by each individual economic subject. Which factors determine firms’ price-setting is a particularly important question. This paper outlines the major themes and results on price-setting behaviour that have emerged from international research on the basis of surveys conducted by central banks of many developed countries