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Sticky Prices in the Euro Area: A Summary of New Micro-Evidence

  • Luis J. Álvarez
  • Emmanuel Dhyne
  • Marco Hoeberichts
  • Claudia Kwapil
  • Hervé Le Bihan
  • Patrick Lünnemann
  • Fernando Martins
  • Roberto Sabbatini
  • Harald Stahl
  • Philip Vermeulen
  • Jouko Vilmunen

This paper summarises the vast evidence on micro price-setting recently obtained for euro area countries. We consider studies with micro data on consumer and producer prices, as well as survey information. The main findings are: (1) prices in the euro area are sticky and stickier than in the US; (2) downward price rigidity is only slightly more marked than upward price rigidity; (3) heterogeneity and asymmetries are observed in price-setting; and (4) the relevance of theories that explain price stickiness, such as implicit or explicit contracts, marginal costs, and coordination failure, is confirmed, whereas menu costs, pricing thresholds, and costly information explanations are judged much less relevant by firms. (JEL: C25, D40, E31) (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: 575-584

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