Price‐Setting Behaviour in Lesotho: Stylised Facts from Consumer Retail Prices |
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| Authors: | Mamello Amelia Nchake Lawrence Edwards Neil Rankin |
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| Affiliation: | 1. School of Economics, University of Cape Town, South Africa;2. School of Economics, Southern Africa Labour Development Research Unit and Policy Research in International Services and Manufacturing, University of Cape Town, South Africa;3. Department of Economics, Stellenbosch University, South Africa |
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| Abstract: | This paper documents some of the main features of price‐setting behaviour by retail outlets in Lesotho over the period March 2002 to December 2009. These features include the frequency, size, duration and synchronisation of price changes. In addition, the paper compares price‐setting behaviour in Lesotho and South Africa using a comparable set of products. The findings reveal considerable heterogeneity in price‐setting behaviour across products, outlets, locations and time. Variations in inflation are strongly correlated with the average size of price changes, but rising inflation raises the frequency of price increases and reduces the frequency of price decreases. Price decreases constitute an important determinant of inflation movements. Surprisingly, the frequency and size of price changes in Lesotho differ substantially from those in South Africa, despite the presence of common retail chains and their joint membership in a customs union and common monetary area. These findings open up opportunities for further research into the sources of heterogeneity across products and Lesotho and South Africa in the setting of prices. |
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| Keywords: | E31 D40 D21 L21 Lesotho price changes price rigidity inflation |
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