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

Álvarez, Luis J.; Dhyne, Emmanuël; Hoeberichts, Marco; Kwapil, Claudia; Bihan, Hervé Le; Lünnemann, Patrick; Martins, Fernando; Sabbatini, Roberto; Stahl, Harald; Vermeulen, Philip; Vilmunen, Jouko

doi:10.1162/jeea.2006.4.2-3.575

Cited by 352 publications

(174 citation statements)

References 21 publications

(35 reference statements)

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“…This result is particularly important given that food inflation in the U.S. is far more transitory and less significant in the creation of overall inflation expectations than it is in some other economies. Alvarez et al (2005) look at the persistence of inflation across components in the Eurozone, and compare these results to similar studies done for the United States. As with earlier studies, they find that in both regions, food prices are less persistent than nonfood prices (particularly services), but that across all categories, prices in Europe are markedly more persistent than prices in the U.S.…”

Section: Introductionmentioning

confidence: 85%

Reconsidering the Role of Food Prices in Inflation

Walsh

2011

IMF Working Papers

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Food prices are generally excluded from measures of inflation most closely watched by policymakers due either to their transitory nature or their higher volatility. However, in lower income countries, food price inflation is not only more volatile but also on average higher than nonfood inflation. Food inflation is also in many cases more persistent than nonfood inflation, and shocks in many countries are propagated strongly into nonfood inflation. Under these conditions, and particularly given high global commodity price inflation in recent years, a policy focus on measures of core inflation that exclude food prices can misspecify inflation, leading to higher inflationary expectations, a downward bias to forecasts of future inflation and lags in policy responses. In constructing measures of core inflation, policymakers should therefore not assume that excluding food price inflation will provide a clearer picture of underlying inflation trends than headline inflation. JEL Classification Numbers: E31, E52, E58, O23

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Section: Introductionmentioning

confidence: 85%

Reconsidering the Role of Food Prices in Inflation

Walsh

2011

IMF Working Papers

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“…The median duration of price changes is found to be only 20% for consumer prices, and 21% for producer prices. Alvarez et al (2006) find that price changes are even less common in the Euro area. On average, in a given month only 15.1% of prices change, and the average length of time between price changes is from 4 to 5 quarters.…”

Section: Frequency Of Price Adjustmentsmentioning

confidence: 92%

Microfoundations of Inflation Persistence in the New Keynesian Phillips Curve

Chauvet

Kim

2010

SSRN Journal

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This paper proposes a dynamic stochastic general equilibrium model that endogenously generates inflation persistence. We assume that although firms change prices periodically, they face convex costs that preclude optimal adjustment. In essence, the model assumes that price stickiness arises from both the frequency and size of price adjustments. The model is estimated using Bayesian techniques, and the results strongly support both sources of price stickiness in the U.S. data. In contrast with traditional sticky price models, the framework yields inflation inertia, a delayed effect of monetary policy shocks on inflation, and the observed "reverse dynamic" correlation between inflation and economic activity.JEL classification: E0, E31

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“…Following Alvarez et al (2006), Álvarez and Hernando (2007a) and Greenslade and Parker (2012) who use mark-up pricing 11 A limitation of the data is that it is not possible to identify price changes in response to temporary promotions and seasonal sales. 12 For the full list of product groups, see Table 4 in the supplementary material.…”

Section: Stylised Facts On Price Setting Behaviour In Lesothomentioning

confidence: 99%

Price-setting Behavior and Competition in Developing Countries: an Analysis of Retail Outlets in Lesotho

2018

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We study the relationship between price-setting behavior and the degree of competition in a setting where markets and information flows are relatively imperfect. Using a unique dataset that combines survey data on retail outlets in Lesotho, and detailed historical information on their product prices, we find a non-monotonic relationship between the frequency of price changes and perceived competition, measured by the number of reported competitors. This non-monotonic relationship is consistent with a model of increasing costs of coordinating price changes under tacit collusion with few competitors, and a breakdown of collusion at higher levels of competition. By exploring the nature of the relationship between competition and price rigidity, our study has implications for macroeconomic and competition policy, and underscores the scope for interaction between the two.

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

Cited by 352 publications

References 21 publications

Reconsidering the Role of Food Prices in Inflation

Reconsidering the Role of Food Prices in Inflation

Microfoundations of Inflation Persistence in the New Keynesian Phillips Curve

Price-setting Behavior and Competition in Developing Countries: an Analysis of Retail Outlets in Lesotho

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