Asymmetries in the price setting behavior of Firms: evidence from a panel of Italian firms

In this paper, we analyze firms' pricing behavior using a full informative micro dataset that accounts for a large part of Italian firms. In our view, “the black boxes†to examine are the relations between price setting, market structure and spatial disparities. A first goal of the research is to investigate the link between asymmetries in price changes and spatial dependence. Besides, we compare the price dynamics among sectors, namely manufacturing vs. service. It is irrefutable that prices stickiness is linked to good market rigidities. Consequently, these issues have extremely important policy implications; for instance, the Monetary Authority considers the macro price indexes to determine the right policy to stabilize the economy and to improve social welfare. However, the Central Bank does not distinguish the likely aggregation bias source from the cross sector-region-country heterogeneities. On the other hand, the propagation mechanism of an adverse monetary policy impulse, following a cost-push shock, may induce considerable mortality for firms' survival, expressed by the entry/exit balance. Overall, the purpose of this paper is to provide an analysis of survey data that allows us to collect important aspects for Economic Policy analysis, which could not be drawn from analysis with “mesoeconomic†or aggregate data.Price-setting behavior, Price rigidity, Inflation Persistence