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Abstract:

CEP occasional paper
Prices and inflation in the UK - A new dataset
Richard Davies
February 2021
Paper No' CEPOP55:
Full Paper (pdf)

JEL Classification: E12; E31; E32; E51; E52; E58


Tags: eu referendum; covid-19; consumer prices; inflation

This paper presents a new dataset of 41 million UK consumer prices, providing facts on the frequency, size and timing of price changes between 1988 and 2020. The micro data are the ‘price quotes’ of individual consumer products that make up the official Consumer Prices Index (CPI) for the UK. Prices are recorded between January 1988 and December 2020 and cover a wide-ranging selection of items including food and drink, homewares, furniture and appliances, motoring supplies and fuels as well as a range of services. The extended time coverage allows a comparison of historic shocks, including the ERM crisis, 2008 financial crash and 2016 EU referendum, with the Coronavirus pandemic. The long-run facts fit closely with the pattern of nominal rigidities seen in other countries. Overall, state-dependent rather than time-dependent pricing models are consistent with UK firm behaviour, and the data show strong support for the notion that prices are ‘volatile while anchored’ as in the more recent menu cost models. The facts show the extraordinary experience of 2020, which was the most volatile year, in terms of pricing, since at least 1991.