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Sticky Prices in The Euro Area: a Summary of New Micro Evidence

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  • Luis J. Álvarez
  • Emmanuel Dhyne
  • Marco Hoeberichts
  • C. Kwapil
  • Hervé Le Bihan
  • Patrick Lünnemann
  • Fernando Martins
  • R. Sabbatini
  • H. Stahl
  • Philip Vermeulen
  • Jouko Vilmunen

Abstract

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.

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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200605.

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Date of creation: 2006
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Handle: RePEc:ptu:wpaper:w200605

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