Sticky Prices in the Euro Area: A Summary of New Micro Evidence

By Luis J. Álvarez, Emmanuel Dhyne, M. Hoeberichts, Claudia Kwapil, Hervé le Bihan, P. Lünnemann, Fernando Martins, R. Sabbatini, Harald Stahl, Philip Vermeulen and 1 more. Social Science Research Network, 2006

507 citations recorded by the source corpus.

This paper presents original evidence on price setting in the euro area at the individual level. We use micro data on consumer (CPI) and producer (PPI) prices, as well as survey information. Our main findings are: (i) prices in the euro area are sticky and more so than in the US; (ii) there is evidence of heterogeneity and of asymmetries in price setting behaviour; (iii) downward price rigidity is only slightly more marked than upward price rigidity and (iv) implicit or explicit contracts and coordination failure theories are important, whereas menu or information costs are judged much less relevant by firms.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/e562140fdf5322e48808df27263fc9124a59df51

Citations in the corpus

• The Inflation-Output Trade-Off with Downward Wage Rigidities (2011, unknown): “Regarding goods prices instead, evidence of downward wage rigidities is weaker and less conclusive (see Alvarez et al. 2006 and Blinder et al. 1998, chap.”
• The Patterns and Determinants of Price Setting in the Belgian Industry (2006, unknown): “The implications these new results have for macroeconomic modelling are summarised in Altissimo et al. (2006), Álvarez et al. (2006) and Angeloni et al. (2006).”
• Mortgage Markets, Collateral Constraints, and Monetary Policy: Do Institutional Factors Matter? (2007, unknown): “Yj,t(i) = μ Pj,t(i) Pj,t ¶−εj Yj,t j = c, d (2)”
• FiMod - a DSGE Model for Fiscal Policy Simulations (2012, unknown): “Micro-data for the euro area on price setting reports relatively low price durations with a median of around 3.5 quarters (i.e. close to one year; see Alvarez et al., 2006; for a BANCO DE ESPAÑA 29 DOCUMENTO DE TRABAJO N.º 1110 summary of more recent micro-evidence).”