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

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  • Gaspar, Vítor
  • Levin, Andrew
  • Martins, Fernando Manuel
  • Smets, Frank

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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Cited by:
  1. Mackowiak, Bartosz Adam & Smets, Frank, 2008. "On Implications of Micro Price Data for Macro Models," CEPR Discussion Papers 6961, C.E.P.R. Discussion Papers.
  2. Carlos Usabiaga & Diego Romero-Ávila, 2012. "New Disaggregate Evidence on Spanish Inflation Persistence," EcoMod2012 3800, EcoMod.
  3. Diego Romero-�vila & Carlos Usabiaga, 2012. "Disaggregate evidence on Spanish inflation persistence," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 3029-3046, August.

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