Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Editorial DirectorJan Smets, Member of the Board of Directors of the National Bank of Belgium Statement of purpose:The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium. AbstractThis study investigates the pricing behaviour of firms in the euro area on the basis of surveys conducted by nine Eurosystem national central banks. Overall, more than 11,000 firms participated in the survey. The results are very robust across countries. Firms operate in monopolistically competitive markets, where prices are mostly set following mark-up rules and where price discrimination is a common practice. Our evidence suggests that both time-and state-dependent pricing strategies are applied by firms in the euro area: around one-third of the companies follow mainly time-dependent pricing rules while two-thirds use pricing rules with some element of statedependence. Although the majority of firms take into account a wide range of information, including past and expected economic developments, about one-third adopts a purely backward-looking behaviour. The pattern of results lends support to the recent wave of estimations of hybrid versions of the New Keynesian Phillips Curve. Price stickiness arises both at the stage when firms review their prices and again when they actually change prices. The most relevant factors underlying price rigidity are customer relationships -as expressed in the theories about explicit and implicit contracts -and thus, are mainly found at the price changing (second) stage of the price adjustment process. Finally, we provide evidence that firms adjust prices asymmetrically in response to shocks, depending on the direction of the adjustment and the source of the shock: while cost shocks have a greater impact when prices have to be raised than when they have to be reduced, reductions in demand are more likely to induce a price change than increases in demand.

discussions on a previous version of this paper, and more The Eurosystem Inflation Persistence NetworkThis paper reflects research conducted within the Inflation Persistence Network (IPN), a team of Eurosystem economists undertaking joint research on inflation persistence in the euro area and in its member countries. The research of the IPN combines theoretical and empirical analyses using three data sources: individual consumer and producer prices; surveys on firms' price-setting practices; aggregated sectoral, national and area-wide price indices. Patterns, causes and policy implications of inflation persistence are addressed.The IPN is chaired by Ignazio Angeloni; Stephen Cecchetti (Brandeis University), Jordi Galí (CREI, Universitat Pompeu Fabra) and Andrew Levin (Board of Governors of the Federal Reserve System) act as external consultants and Michael Ehrmann as Secretary.The refereeing process is co-ordinated by a team composed of Vítor Gaspar (Chairman), Stephen Cecchetti, Silvia Fabiani, Jordi Galí, Andrew Levin, and Philip Vermeulen. The paper is released in order to make the results of IPN research generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the author's own and do not necessarily reflect those of the Eurosystem. C O N T E N T S Abstract 4Non-technical summary 5

In 2010 all ECB publications feature a motif taken from the €500 banknote. COSTS, DEMAND, AND PRODUCER PRICE CHANGES 1 by Claire Loupias 2 and Patrick Sevestre 3 1 This study was initiated in the context of the Eurosystem Inflation Persistence Network. We are grateful to R. Ricart and B. Fougier for having provided us with the series of the monthly manufacturing business surveys of the Banque de France, as well as to the DARES (Direction de l. Animation de la Recherche, des Études et des Statistiques, French Ministry of Labor), for having provided the data about wages. Thanks also to P. Franceschi and A. Gubian, from the ACOSS (Agence Centrale des Organismes de Sécurité Sociale) who gave us access to the monthly industry level wage bill series used in previous versions of this paper. We are also strongly indebted to T. Heckel, H. Le Bihan, E. Gautier and to colleagues from the Wage Dynamics Network of the Eurosystem for helpful discussions. We would like to thank also the participants to seminars at INRA

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In 2010 all ECB publications feature a motif taken from the €500 banknote. COSTS, DEMAND, AND PRODUCER PRICE CHANGES 1 by Claire Loupias 2 and Patrick Sevestre 3 1 This study was initiated in the context of the Eurosystem Inflation Persistence Network. We are grateful to R. Ricart and B. Fougier for having provided us with the series of the monthly manufacturing business surveys of the Banque de France, as well as to the DARES (Direction de l. Animation de la Recherche, des Études et des Statistiques, French Ministry of Labor), for having provided the data about wages. Thanks also to P. Franceschi and A. Gubian, from the ACOSS (Agence Centrale des Organismes de Sécurité Sociale) who gave us access to the monthly industry level wage bill series used in previous versions of this paper. We are also strongly indebted to T. Heckel, H. Le Bihan, E. Gautier and to colleagues from the Wage Dynamics Network of the Eurosystem for helpful discussions. We would like to thank also the participants to seminars at INRA