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Evidence from Surveys of Price-Setting Managers: Policy Lessons and Directions for Ongoing Research

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Author Info
Gaspar, Vítor
Levin, Andrew
Martins, Fernando Manuel
Smets, Frank

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Abstract

Understanding the features and the determinants of individual price setting behaviour is important for the formulation of monetary policy. These behavioural mechanisms play a fundamental role in influencing the characteristics of aggregate inflation and in determining how monetary policy affects inflation and real economic activity. The Inflation Persistence Network, a collaborative research effort of the Eurosystem, analysed a large number of panel data sets of individual price records and conducted surveys of price-setting managers in many euro area countries. This paper discusses to what extent the extensive evidence coming from those two data sources provides support for some basic elements of the New Keynesian perspective. It analyses the implications of the micro evidence for distinguishing between competing theories of price stickiness and provides some brief reflections about the lessons for monetary policy.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6227.

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Date of creation: Mar 2007
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Handle: RePEc:cpr:ceprdp:6227

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Keywords: monetary policy New Keynesian models price setting price stickiness

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Find related papers by JEL classification:
D4 - Microeconomics - - Market Structure and Pricing
E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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