This paper documents some of the main features of price setting behaviour
by retail outlets in Lesotho over the period March 2002 to December
2009. The sample of data covers 229 product items for 345 retail
outlets. The paper has three main objectives. Firstly, it presents key indicators
of price setting behaviour such as the frequency of price changes,
the average size of price changes and the probability of price changes at
the retail outlet level. Secondly, it identifies some of the dynamic features
of price changes, including the synchronization of price changes and
the relationship between the frequency and size of price changes and the
duration of the existing price. Finally, the paper compares the stylised
facts on price setting behaviour in Lesotho to other countries and South
Africa in particular. The findings of the paper corroborate those in the
international empirical literature. Substantial heterogeneity in price setting
behaviour is found across products, outlets and time. Variations in
inflation are strongly correlated with the average size of price changes,
but rising inflation raises the frequency of price increases and reduces the
frequency of price decreases. Surprisingly, the frequency and size of price
changes in Lesotho differ substantially from those in South Africa, despite
the presence of common retail chains and their joint membership in a customs
union and common monetary area.