Does Consumer Price Rigidity Exist in Barbados?

This paper uses a unique micro data set of price records underlying the Barbados retail price index between 1994 and 2008 to provide a detailed assessment of consumer price rigidity. The major aim is to calculate price durations and the patterns of price-setting across sectors. We also check whether price cuts are as frequent as increases, and whether there is specific downward nominal rigidity. We find that prices in Barbados tend to change relatively frequently, with between 50 and 80 percent of items in every category reporting a price change every month. While there are regular monthly price reductions as well as increases, the reductions are always smaller and fewer than the increases. The paper also reports no measurable impact of changes in the money supply or national inflation on the frequency of price changes.