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New Evidence on Inflation Persistence and Price Stickiness in the Euro Area: Implications for Macro Modeling

  • Ignazio Angeloni
  • Luc Aucremanne
  • Michael Ehrmann
  • Jordi Galí
  • Andrew Levin
  • Frank Smets

This paper evaluates new evidence on price-setting practices and inflation persistence in the euro area with respect to its implications for macro modeling. It argues that several of the most commonly used assumptions in micro-founded macro models are seriously challenged by the new findings. (JEL: E31, E52) (c) 2006 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 4 (2006)
Issue (Month): 2-3 (04-05)
Pages: 562-574

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Handle: RePEc:tpr:jeurec:v:4:y:2006:i:2-3:p:562-574
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  11. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1295-1328, November.
  12. 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, vol. 114(2), pages 655-690, May.
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  17. Daniel Dias & Carlos Robalo Marques & J.M.C.Santos Silva, 2005. "Time or State Dependent Price Setting Rules? Evidence from Portuguese Micro Data," Working Papers w200508, Banco de Portugal, Economics and Research Department.
  18. Mathias Trabandt, 2004. "Sticky Information vs. Sticky Prices: A Horse Race in a DSGE Framework," 2004 Meeting Papers 543, Society for Economic Dynamics.
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  23. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & C. Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & R. Sabbatini & H. Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in The Euro Area: a Summary of New Micro Evidence," Working Papers w200605, Banco de Portugal, Economics and Research Department.
  24. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-84, November.
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  26. Gregory de Walque & Frank Smets & Raf Wouters, 2006. "Price Shocks in General Equilibrium: Alternative Specifications," CESifo Economic Studies, CESifo, vol. 52(1), pages 153-176, March.
  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, vol. 4(2-3), pages 585-593, 04-05.
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  29. Alexander L. Wolman, 1999. "Sticky prices, marginal cost, and the behavior of inflation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 29-48.
  30. Paloviita , Maritta, 2004. "Inflation dynamics in the euro area and the role of expectations: further results," Research Discussion Papers 21/2004, Bank of Finland.
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