The impact of the 2008 crisis on UK prices: what we can learn from the CPI microdata

This paper takes the locally collected price-quotes used to construct the CPI index in the UK for the period 1996-2013 and explores the impact of the Great Recession (2008-9) on the pricing behavior of rms. We develop a time-series framework which captures the link between macroeconomic variables and the behavior of prices in terms of the frequency of price change, the dispersion of price levels and the size, dispersion and kurtosis of price-growth. We nd strong evidence for ination having an e⁄ect, but not output. The change in the behavior of prices during the Great Recession is largely explained by changes in ination and VAT. Nevertheless, the magnitude of the ination e⁄ect is su¢ ciently small that it need not inuence monetary policy