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New evidence on inflation persistence and price stickiness in the Euro area: Implications for macro modelling

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  • Ignazio Angelloni
  • Luc Aucremanne
  • Michael Ehrmann
  • Jordi Galí

    ()

  • Andrew Levin
  • Frank Smets

Abstract

This paper evaluates new evidence on price setting practices and inflation persistence in the euro area with respect to its implications for macro modelling. It argues that several of the most commonly used assumptions in micro-founded macro models are seriously challenged by the new findings.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/910.pdf
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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 910.

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Date of creation: Sep 2005
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Handle: RePEc:upf:upfgen:910

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Web page: http://www.econ.upf.edu/

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Keywords: Price setting practices; macro modellling;

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  5. Trabandt, Mathias, 2003. "Sticky Information vs. Sticky Prices : A Horse Race in a DSGE Framework," SFB 373 Discussion Papers 2003,41, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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  7. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1922, Harvard - Institute of Economic Research.
  8. Ehrmann, M. & Smets, F., 2001. "Uncertain Potential Output: Implications for Monetary Policy," Papers 59, Quebec a Montreal - Recherche en gestion.
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  10. Dias, Daniel & Robalo Marques, Carlos & Santos Silva, João M. C., 2005. "Time or state dependent price setting rules? Evidence from Portuguese micro data," Working Paper Series, European Central Bank 0511, European Central Bank.
  11. Mark Gertler & John Leahy, 2006. "A Phillips curve with an Ss foundation," Working Papers 06-8, Federal Reserve Bank of Philadelphia.
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  13. Athanasios Orphanides & John C. Williams, 2002. "Imperfect knowledge, inflation expectations, and monetary policy," Working Paper Series, Federal Reserve Bank of San Francisco 2002-04, Federal Reserve Bank of San Francisco.
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  15. Alexander L. Wolman, 1999. "Sticky prices, marginal cost, and the behavior of inflation," Economic Quarterly, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue Fall, pages 29-48.
  16. Rotemberg, Julio J, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(4), pages 517-31, October.
  17. Coenen, Gunter & Levin, Andrew T. & Christoffel, Kai, 2007. "Identifying the influences of nominal and real rigidities in aggregate price-setting behavior," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(8), pages 2439-2466, November.
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  20. Julio J. Rotemberg, 2004. "Fair Pricing," NBER Working Papers 10915, National Bureau of Economic Research, Inc.
  21. Luc Aucremanne & Emmanuel Dhyne, 2005. "Time-dependent versus State-dependent Pricing: A Panel Data Approach to the Determinants of Belgian Consumer Price Changes," Working Paper Research, National Bank of Belgium 66, National Bank of Belgium.
  22. M. H. Khalil Timamy, 2005. "Debate," Review of African Political Economy, Taylor & Francis Journals, vol. 32(104-105), pages 383-393, June.
  23. Gregory de Walque & Frank Smets & Raf Wouters, 2006. "Price Shocks in General Equilibrium: Alternative Specifications," CESifo Economic Studies, CESifo, CESifo, vol. 52(1), pages 153-176, March.
  24. Álvarez, Luis J. & Burriel, Pablo & Hernando, Ignacio, 2005. "Do decreasing hazard functions for price changes make any sense?," Working Paper Series, European Central Bank 0461, European Central Bank.
  25. Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing And The General Equilibrium Dynamics Of Money And Output," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(2), pages 655-690, May.
  26. Paloviita , Maritta, 2004. "Inflation dynamics in the euro area and the role of expectations: further results," Research Discussion Papers, Bank of Finland 21/2004, Bank of Finland.
  27. Filippo Altissimo & Laurent Bilke & Andrew Levin & Thomas Mathä & Benoit Mojon, 2006. "Sectoral and Aggregate Inflation Dynamics in the Euro Area," Journal of the European Economic Association, MIT Press, MIT Press, vol. 4(2-3), pages 585-593, 04-05.
  28. Adam, Klaus & Padula, Mario, 2003. "Inflation dynamics and subjective expectations in the United States," Working Paper Series, European Central Bank 0222, European Central Bank.
  29. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 37(2-3), pages 345-370, April.
  30. de Walque, G. & Smets, F. & Wouters, R., 2005. "Price setting in General Equilibrium: Alternative Specifications," Computing in Economics and Finance 2005, Society for Computational Economics 370, Society for Computational Economics.
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