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

Listed author(s):
  • 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 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.barcelonagse.eu/sites/default/files/working_paper_pdfs/242.pdf
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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 242.

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Date of creation: Sep 2005
Handle: RePEc:bge:wpaper:242
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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper Series WP-01-08, Federal Reserve Bank of Chicago.
  2. Mikhail Golosov & Robert E. Lucas, 2003. "Menu Costs and Phillips Curves," NBER Working Papers 10187, National Bureau of Economic Research, Inc.
  3. 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.
  4. 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.
  5. Mankiw, N. Gregory & Reis, Ricardo, 2002. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Scholarly Articles 3415324, Harvard University Department of Economics.
  6. N. Gregory Mankiw, 2000. "The Inexorable and Mysterious Tradeoff Between Inflation and Unemployment," NBER Working Papers 7884, National Bureau of Economic Research, Inc.
  7. Athanasios Orphanides & John Williams, 2004. "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," NBER Chapters, in: The Inflation-Targeting Debate, pages 201-246 National Bureau of Economic Research, Inc.
  8. John M. Roberts, 1994. "Is inflation sticky?," Working Paper Series / Economic Activity Section 152, Board of Governors of the Federal Reserve System (U.S.).
  9. L. J. Álvarez & E. Dhyne & M. Hoeberichts & C. Kwapil & H. Le Bihan & P. Lünnemann & F. Martins & R. Sabbatini & H. Stahl & P. Vermeulen & J. Vilmunen, 2005. "Sticky Prices in the Euro Area: a Summary of New Micro Evidence," DNB Working Papers 062, Netherlands Central Bank, Research Department.
  10. Ehrmann, M. & Smets, F., 2001. "Uncertain Potential Output: Implications for Monetary Policy," Papers 59, Quebec a Montreal - Recherche en gestion.
  11. Roberts, John M., 1997. "Is inflation sticky?," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 173-196, July.
  12. Coenen, Günter & Levin, Andrew T., 2004. "Identifying the influences of nominal and real rigidities in aggregate price-setting behavior," Working Paper Series 0418, European Central Bank.
  13. 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.
  14. Adam, Klaus & Padula, Mario, 2003. "Inflation dynamics and subjective expectations in the United States," Working Paper Series 0222, European Central Bank.
  15. Julio J. Rotemberg, 2004. "Fair Pricing," NBER Working Papers 10915, National Bureau of Economic Research, Inc.
  16. 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.
  17. Álvarez, Luis J. & Burriel, Pablo & Hernando, Ignacio, 2005. "Do decreasing hazard functions for price changes make any sense?," Working Paper Series 0461, European Central Bank.
  18. 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 66, National Bank of Belgium.
  19. Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
  20. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-984, November.
  21. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 517-531.
  22. Mark Gertler & John Leahy, 2008. "A Phillips Curve with an Ss Foundation," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 533-572, 06.
  23. 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.
  24. Paloviita, Maritta, 2004. "Inflation dynamics in the euro area and the role of expectations : further results," Research Discussion Papers 21/2004, Bank of Finland.
  25. M. H. Khalil Timamy, 2005. "Debate," Review of African Political Economy, Taylor & Francis Journals, vol. 32(104-105), pages 383-393, June.
  26. Jeff Fuhrer & George Moore, 1995. "Inflation Persistence," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 127-159.
  27. Erceg, Christopher J. & Levin, Andrew T., 2003. "Imperfect credibility and inflation persistence," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 915-944, May.
  28. 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.
  29. Leif Danziger, 1999. "A Dynamic Economy with Costly Price Adjustments," American Economic Review, American Economic Association, vol. 89(4), pages 878-901, September.
  30. 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.
  31. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 345-370, April.
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