Factors Impacting Price Revision by Firms: Evidence from Microdata

Abstract

This study analyses pricing practices of Russian firms based on data from the monitoring of businesses by the Bank of Russia for 2002–2022. The estimation uses a multinomial logistic model with specifications adapted to Russian realities, which allows for the consideration of both time effects and the impact of firms’ state and the state of the economy on price changes. This study examines micro variables (costs, demand, financial position, and firms’ expectations) and macro variables (including inflation, exchange rates, and business activity). Firms’ response to factors causing price increases and decreases is asymmetric, and price rigidity depends on industry, region, and current economic conditions, with industry differences being more pronounced than regional variations. The results show a correlation between price change frequency and direction and a combination of internal and external factors. They also confirm that considering both the time- and state-dependent components is important for understanding pricing mechanisms.