How Do Individual UK Producer Prices Behave?

Abstract

This article presents a number of stylised facts about the behaviour of individual UK producer prices. First, on average 26% of prices change each month, although there is considerable heterogeneity between sectors. Second, the probability of price changes is not constant over time. Third, the distribution of price changes is wide, although a significant number of changes are relatively small. Fourth, prices that change more frequently do so by less. Conventional pricing theories struggle to match these results, particularly the marked heterogeneity.