How do consumer prices change in an island economy? Empirical evidence from the prices of four food and beverage products in the Canary Islands
The purpose of this work is to find empirical evidence on the behavior
of the prices in an insular region, with a market of small size and, simultaneously,
fragmented. To that end, with consumer price data for four products of the
food and beverage group observed in the Canary Islands we study the price and
rigidity, characterized by frequency, duration and size of price changes. The main
empirical result found for these four products is that market fragmentation and the
type of establishment are important factors in explaining the price level and not
so when one wants to explain his change. In this case, the product is the decisive element in explaining the basic features of price change, not observing rigidities
either in terms of changes or establishments.
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