The paper uses data collected through the Survey on Inflation and Growth Expectations conducted quarterly by the Bank of Italy to investigate the role of a number of factors in the setting of sales prices by Italian firms, including input costs and expectations of future developments in firms' own prices and consumer inflation, taking into account various firm characteristics.
The share of firms that change their prices is positively associated with the current dynamics of consumer inflation. Firms' price revisions depend on past changes in their price lists, changes in input costs, and expectations about their own sales prices. Firms' heterogeneity in the revision of their price lists depends on differences in expectations about their own selling prices, while differences in input costs play only a limited role.
