What Causes Large Price Changes on a Post War Country as the Republic of Kosovo? From the Financial Manager's Perspective

Abstract

In this paper, we investigate what causes large price changes on a post war country as the Republic of Kosovo. Based on the perceptions of financial managers and using the principal component and regression analyses based on data obtained from 11612 questionnaires with financial managers in different sector in Kosovo. The study finds that price setting rule based on market level, the increase in price are affected from labor costs and price decrease are affected from financial costs and labor costs. Moreover, the price flexibility effect from physical elasticity, and the probability or the frequency of price changes is affected VAT rate changes. The theories explaining price stickiness is explicit contracts, the main reason for price rigidity is quality. The result implies that the change in prices may be impacted by different factors which varies according to their influence. There is no significant relationship between price increase and the impact of factors that influence in change in prices. We conclude that financial managers should adopt a more coordinated type of price setting and analyzing each type of factor more carefully this will contribute to have a coordinate relation between changes in price and factors that effect on it.