Price setting behaviour in Latvia: Econometric evidence from CPI micro data

► We develop a logit model for the probability of consumer price changes in Latvia. ► Price formation in Latvia is a combination of state- and time-dependent behaviour. ► Probability of a price increase mostly depends on overall accumulated inflation. ► Probability of a price decrease also depends on inflation at a product level. ► State-dependent behaviour implies faster adjustment in the case of large shocks.