Price Setting before and during the Pandemic: Evidence from Swiss Consumer Prices

Abstract Using microdata underlying the Swiss consumer price index from 2008 to 2025, we document new features of price rigidity and assess their implications for inflation dynamics. The frequency of price changes increased in the decade before the pandemic, driven by items shifting to online price collection, as confirmed by causal identification from an event study around a collection‐mode switch. During the pandemic, the aggregate frequency response was muted, masking large cross‐sectional heterogeneity: demand contractions and stricter government interventions each reduced the frequency of adjustments, while demand contractions amplified their size. In response to aggregate shocks, firms adjust mainly the size rather than the frequency of price changes, consistent with time‐dependent pricing. However, nonlinear local projections reveal that when price flexibility is high or price selection is strong, firms respond along both margins, monetary nonneutrality falls, and the appropriate macro model switches from time‐dependent to state‐dependent.