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Inflation persistence and price-setting in the euro area : results of the Eurosystem Inflation Persistence Network

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  • E. Dhyne

    (National Bank of Belgium, Research Department)

Abstract

This article presents a summary of the main results produced by the Inflation Persistence Network (IPN), a network of researchers from the twelve national central banks of the euro area, the ECB and the universities, which aimed to conduct a joint analysis of Inflation persistence and pricing mechanisms. This network carried out both macroeconomic and microeconomic surveys. As regards Inflation persistence, one of the research findings indicated that the degree of Inflation persistence in the euro area was relatively moderate under the current monetary policy regime, but that these estimates were not very accurate. As regards the pricing strategies of firms, the IPN demonstrated among other things that firms in the euro area changed their prices less often than American firms, but that this greater rigidity was not due to any excess nominal downward price rigidity. The findings should permit the development of theoretical models based on microeconomic foundations compatible with the observed behaviour, and provide a better understanding of Inflation and the impact of monetary policy.

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Bibliographic Info

Article provided by National Bank of Belgium in its journal Economic Review.

Volume (Year): (2005)
Issue (Month): IV (December)
Pages: 17-37

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Handle: RePEc:nbb:ecrart:y:2005:m:december:i:iv:p:17-37

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Keywords: Inflation persistence; price rigidity; monetary policy;

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