Price Setting in the Euro Area : Some Stylised Facts from Individual Producer Price 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 Editorial DirectorJan Smets, Member of the Board of Directors of the National Bank of Belgium Statement of purposeThe 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. OrdersFor orders and information on subscriptions and reductions: National Bank of Belgium, Documentation -Publications service, boulevard de Berlaimont 14, 1000 Brussels there is no evidence of downward nominal rigidity: price changes are for about 45% decreases and 55% increases. Fifth, price changes are sizeable compared to the inflation rate. The paper also examines the factors driving producer price changes. It finds that costs structure, competition, seasonality, inflation and attractive pricing all play a role in driving producer price changes. In addition producer prices tend to be more flexible than consumer prices.JEL-code : E31, D40, C25.

Price Changes - Stickiness and Internal Coordination in Multiproduct Firms

“…As these structural statistics are linked to price data, the final sample of price observations comprises all products and manufacturing industries. Vermeulen et al, 2012) shows that Norwegian producers' pricing pattern is more or less in line with what is observed for the rest of Europe. Table 1 shows the distribution of the monthly prices changes.…”

“…Indeed, descriptive evidence from micro data suggests that there are several consecutive periods where no price changes occur, and then one observes significant changes for a short period Dhyne et al, 2006;Vermeulen et al, 2012). Such patterns may be explained by non-convex or fixed menu costs.…”

Rigid Labour Compensation and Flexible Employment ? Firm-Level Evidence with Regard to Productivity for Belgium

“…In the Basu and Kimball (1997) methodology, they are estimated by GMM, thus allowing for fixed effects. 25 Vermeulen et al (2007) report a higher average (weighted) frequency of producer price changes for Belgium (0.24) than for Italy (0.15). However, part of the lower frequency in Italy can be explained by the absence of energy products that typically have the highest frequency of price changes.…”

Microfoundations of Inflation Persistence in the New Keynesian Phillips Curve

“…(2008) show that in the U.S. 44% of consumer price changes are smaller than 5%, 25% are smaller than 2.5%, and 12% are smaller than 1%, in absolute value. Vermeulen et al (2007) study the Euro area and find that a quarter of producer price changes is smaller than 1% in absolute value, and that the mean price change is only 4%. Taylor and Woodford (1999) stress that the ability to characterize the "reverse dynamic" relationship between output gap and inflation is a yardstick of success of monetary models.…”