Do firms’ financial constraints affect their price setting?

Post No.364. In the recent inflation environment, the relation between firms' financial situation and how they decide to adjust their prices has regained attention. While price adjustments had several determinants, we focus here on the role played by firms’ financial constraints. On the basis of firms’ behaviour in the 2010-22 period for France, we show that, when firms are more financially constrained, they more often increase their prices.