Demand or Supply? Price Adjustment Heterogeneity during the COVID-19 Pandemic
We study price-setting behavior and subjective perceptions in German firm-level survey data to infer the relative importance of supply and demand during the COVID-19 pandemic. Demand shortages dominate at the onset of the pandemic. A reported negative impact of COVID-19 on current business is associated with a rise in the probability to decrease prices up to 10 percentage points in this episode. Supply forces gain in importance during the ensuing sudden surge in inflation and firms perceive goods supply shortages as most restrictive. Firms adversely affected during the early inflation decline show no higher probability of price increases.
Balleer, A., S. Link, M. Menkhoff und P. Zorn (2024), Demand or Supply? Price Adjustment Heterogeneity during the COVID-19 Pandemic. International Journal of Central Banking, 20, 1, 93-158
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