IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Price setting in the euro area: Some stylized facts from Individual Consumer Price Data

  • Emmanuel Dhyne

    ()

    (Banque Nationale de Belgique)

  • Luis J. Álvarez

    ()

    (Banco de España)

  • Hervé le Bihan

    ()

    (Banque de France)

  • Giovanni Veronese

    ()

    (Banca d’Italia)

  • Daniel Dias

    ()

    (Banco de Portugal)

  • Johannes Hoffmann

    ()

    (Deutsche Bundesbank)

  • Nicole Jonker

    ()

    (De Nederlandsche Bank)

  • Patrick Lünnemann

    ()

    (Banque Centrale du Luxembourg)

  • Fabio Rumler

    ()

    (Oesterreichische Nationalbank)

  • Jouko Vilmunen

    ()

    (Suomen Pankki)

This paper documents patterns of price setting at the retail level in the euro area. A set of stylized facts on the frequency and size of price changes is presented along with an econometric investigation of their main determinants. Price adjustment in the euro area can be summarized in six stylized facts. First, prices of most products change rarely. The average monthly frequency of price adjustment is 15 p.c., compared to about 25 p.c. in the US. Second, the frequency of price changes is characterized by substantial cross-product heterogeneity and pronounced sectoral patterns: prices of oil-related) energy and unprocessed food products change very often, while price adjustments are less frequent for processed food products, non-energy industrial goods and services. Third, cross-country heterogeneity exists but is less pronounced. Fourth, price decreases are not uncommon. Fifth, price increases and decreases are sizeable compared to aggregate and sectoral inflation rates. Sixth, price changes are not highly synchronized across price-setters. Moreover, the frequency of price changes in the euro area is related to a number of factors, in particular seasonality, outlet type, indirect taxation, use of attractive prices as well as aggregate or product-specific inflation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/05/Fic/dt0528e.pdf
File Function: First version, August 2005
Download Restriction: no

Paper provided by Banco de España & Working Papers Homepage in its series Working Papers with number 0528.

as
in new window

Length: 53 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:bde:wpaper:0528
Contact details of provider: Web page: http://www.bde.es/

Web page: http://www.bde.es/bde/en/secciones/informes/Publicaciones_se/docs/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. 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 0511, European Central Bank.
  2. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
  3. Denis Fougère & Hervé Le Bihan & Patrick Sevestre, 2007. "Heterogeneity in consumer price stickiness. A microeconometric investigation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00278922, HAL.
  4. Lach, Saul & Tsiddon, Daniel, 1996. "Staggering and Synchronization in Price-Setting: Evidence from Multiproduct Firms," American Economic Review, American Economic Association, vol. 86(5), pages 1175-96, December.
  5. Jeffrey R. Campbell & Benjamin Eden, 2005. "Rigid prices: evidence from U.S. scanner data," Working Paper Series WP-05-08, Federal Reserve Bank of Chicago.
  6. Fabiani, Silvia & Druant, Martine & Hernando, Ignacio & Kwapil, Claudia & Landau, Bettina & Loupias, Claire & Martins, Fernando & Matha, Thomas & Sabbatini, Roberto & Stahl, Harald & Stokman, Ad, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," MPRA Paper 808, University Library of Munich, Germany.
  7. Eyal Baharad & Benjamin Eden, 2003. "Price Rigidity and Price Dispersion: Evidence from Micro Data," Vanderbilt University Department of Economics Working Papers 0321, Vanderbilt University Department of Economics.
  8. Nicole Jonker & Carsten Folkertsma & Harry Blijenberg, 2004. "An Emprical Analysis of Price Setting Behaviour in the Netherlands in the Period 1998-2003 Using Micro Data," DNB Working Papers 019, Netherlands Central Bank, Research Department.
  9. Álvarez, Luis J. & Hernando, Ignacio, 2004. "Price setting behaviour in Spain: stylised facts using consumer price micro data," Working Paper Series 0416, European Central Bank.
  10. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-32, Nov.-Dec..
  11. 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.
  12. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050 Elsevier.
  13. S. Fabiani & M. Druant & I. Hernando & C. Kwapil & B. Landau & C. Loupias & F. Martins & T. Mathä & R. Sabbatini & H. Stahl & A. Stokman, 2005. "The pricing behaviour of firms in the euro area : new survey evidence," Working Paper Research 76, National Bank of Belgium.
  14. Gali, Jordi & Gertler, Mark & David Lopez-Salido, J., 2003. "Erratum to "European inflation dynamics": [European Economic Review 45 (2001), 1237-1270]," European Economic Review, Elsevier, vol. 47(4), pages 759-760, August.
  15. Mónica Dias & Daniel Dias & Pedro Duarte Neves, 2004. "Stylised Features of Price Setting Behaviour in Portugal: 1992-2001," Working Papers w200405, Banco de Portugal, Economics and Research Department.
  16. Hoffmann, Johannes & Kurz-Kim, Jeong-Ryeol, 2006. "Consumer price adjustment under the microscope: Germany in a period of low inflation," Discussion Paper Series 1: Economic Studies 2006,16, Deutsche Bundesbank, Research Centre.
  17. Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April.
  18. Luc Aucremanne & Emmanuel Dhyne, 2004. "How frequently do prices change? Evidence based on the micro data underlying the Belgian CPI," Working Paper Research 44, National Bank of Belgium.
  19. Benjamin Eden, 2001. "Inflation and Price Adjustment: An Analysis of Microdata," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 607-636, July.
  20. Daniel Dias & Carlos Robalo Marques & Pedro Duarte Neves & J.M.C.Santos Silva, 2004. "On the Fisher-Konieczny Index of Price Changes Synchronization," Working Papers w200407, Banco de Portugal, Economics and Research Department.
  21. Josef Baumgartner & Ernst Glatzer & Fabio Rumler & Alfred Stiglbauer, 2005. "How Frequently Do Consumer Prices Change in Austria? Evidence from Micro CPI Data," Working Papers 101, Oesterreichische Nationalbank (Austrian Central Bank).
  22. Patrick Lünnemann & Thomas Mathä, 2005. "Consumer price behaviour in Luxembourg: evidence from micro CPI data," BCL working papers 17, Central Bank of Luxembourg.
  23. David Genesove, 1999. "The Nominal Rigidity of Apartment Rents," NBER Working Papers 7137, National Bureau of Economic Research, Inc.
  24. Aoki, Kosuke, 2001. "Optimal monetary policy responses to relative-price changes," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 55-80, August.
  25. Galí, Jordi & Gertler, Mark & López-Salido, J David, 2001. "European Inflation Dynamics," CEPR Discussion Papers 2684, C.E.P.R. Discussion Papers.
  26. Aucremanne, Luc & Dhyne, Emmanuel, 2005. "Time-dependent versus state-dependent pricing: a panel data approach to the determinants of Belgian consumer price changes," Working Paper Series 0462, European Central Bank.
  27. Konieczny, Jerzy D. & Skrzypacz, Andrzej, 2005. "Inflation and price setting in a natural experiment," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 621-632, April.
  28. de Walque, G. & Smets, F. & Wouters, R., 2005. "Price setting in General Equilibrium: Alternative Specifications," Computing in Economics and Finance 2005 370, Society for Computational Economics.
  29. repec:crs:ecosta:es386b is not listed on IDEAS
  30. 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, Oxford University Press, vol. 114(2), pages 655-690.
  31. Veronese, Giovanni & Fabiani, Silvia & Gattulli, Angela & Sabbatini, Roberto, 2005. "Consumer price behaviour in Italy: evidence from micro CPI data," Working Paper Series 0449, European Central Bank.
  32. Anil K Kashyap, 1995. "Sticky Prices: New Evidence from Retail Catalogs," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 245-274.
  33. Fisher, Timothy C. G. & Konieczny, Jerzy D., 2000. "Synchronization of price changes by multiproduct firms: evidence from Canadian newspaper prices," Economics Letters, Elsevier, vol. 68(3), pages 271-277, September.
  34. John H. Rogers, 2002. "Monetary union, price level convergence, and inflation: how close is Europe to the United States?," International Finance Discussion Papers 740, Board of Governors of the Federal Reserve System (U.S.).
  35. Lach, Saul & Tsiddon, Daniel, 1992. "The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 349-89, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bde:wpaper:0528. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.