Price‐setting behaviour in Spain: evidence from micro PPI data

Abstract

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 EUROSYSTEM INFLATION PERSISTENCE NETWORKIn 2005 all ECB publications will feature a motif taken from the €50 banknote. WO R K I N G PA P E R S E R I E S N O. 5 2 2 / S E P T E M B E R 2 0 0 5 EUROSYSTEM INFLATION PERSISTENCE NETWORK 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.Since June 2005 the IPN is chaired by Frank Smets; 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 Gonzalo Camba-Méndez as Secretary.The refereeing process is co-ordinated by a team composed of Günter Coenen (Chairman), Stephen Cecchetti, Silvia Fabiani, Jordi Galí, Andrew Levin, and Gonzalo Camba-Méndez. 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. © European Central C O N T E N T S Abstract 4Non-technical summary 5

Disaggregate Evidence on Price Stickiness and Implications for Macro Models

“…Some of the most recent work examining disaggregate evidence regarding price stickiness has focused on consumer and producer price indexes (PPI) in Europe, such as Stahl (2004), Sabbatini et al (2004), Dias, Dias, and Neves (2004), and Alvarez, Burriel, and Hernando (2004). Common conclusions of this work are that there is considerable heterogeneity in the degree of price stickiness across industries, that prices of services appear to be somewhat slower to adjust than prices of physical commodities, and that prices of capital equipment and other investment goods tend to be less flexible than prices of consumer goods.…”

Price Stickiness in the US and Europe Revisited: Evidence from Internet Prices*

“…Third, while evidence from surveys among euro area firms suggests that the sluggishness of price adjustment depends on the degree of (perceived) competitiveness (see Fabiani et al. , 2006), so far, there is only limited evidence on the role of competition (see, for example, Álvarez et al , 2010).…”

A Global Assessment of the Degree of Price Stickiness - Results from the NBB Business Survey

“…A traditional candidate to explain sectoral discrepancies in the frequency of price changes is the share of labor costs in value added (see Álvarez, Burriel andHernando, 2010, Cornille andDossche, 2008). If we assume that wages are reset less frequently than the price of other inputs, we expect that the frequency of price changes will be lower in the more labor-intensive sectors.…”

“…Using the information about the sectoral cost structure embodied in the input-output tables, several authors (Álvarez, Burriel and Hernando, 2010, Cornille and Dossche, 2008, Vermeulen et al, 2007 have looked at the link between the frequency of price changes and the energy and labour content of a good. Using sectoral estimates of the frequency of price changes at the NACE 3 digit level for the manufacturing sector, they relate this frequency to the shares of energy or wages in total costs that come from the NACE 2 digit decomposition of the input-output tables.…”