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

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Listed:
  • L. J. Álvarez
  • E. Dhyne
  • M. Hoeberichts
  • C. Kwapil
  • H. Le Bihan
  • P. Lünnemann
  • F. Martins
  • R. Sabbatini
  • H. Stahl
  • P. Vermeulen
  • J. Vilmunen

Abstract

This paper presents original evidence on price setting in the euro area at the individual level. We use micro data on consumer (CPI) and producer (PPI) prices, as well as survey information. Our main findings are: (i) prices in the euro area are sticky and more so than in the US; (ii) there is evidence of heterogeneity and of asymmetries in price setting behaviour; (iii) downward price rigidity is only slightly more marked than upward price rigidity and (iv) implicit or explicit contracts and coordination failure theories are important, whereas menu or information costs are judged much less relevant by firms.

Suggested Citation

  • 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.
    • Handle: RePEc:dnb:dnbwpp:062
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    Keywords

    Price setting; Price stickiness; consumer prices; Producer prices; survey data;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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