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New Facts on Consumer Price Rigidity in the Euro Area

Author

Listed:
  • Erwan Gautier
  • Cristina Conflitti
  • Riemer P. Faber
  • Brian Fabo
  • Ludmila Fadejeva
  • Valentin Jouvanceau
  • Jan-Oliver Menz
  • Teresa Messner
  • Pavlos Petroulas
  • Pau Roldan-Blanco
  • Fabio Rumler
  • Sergio Santoro
  • Elisabeth Wieland
  • Hélène Zimmer

Abstract

Using CPI micro data for 11 euro area countries over 2010–2019, we document new findings on consumer price rigidity in the euro area: (i) the average frequency of price changes is 12 percent; (ii) the distribution of price changes is highly dispersed, with frequent large and small changes; (iii) price changes are more frequent in January; and (iv) the overall size of price changes rises with inflation, but their frequency does not; these changes in the size are driven by movements in the fraction of price changes that are increases, not by the absolute size of price increases or decreases.

Suggested Citation

  • Erwan Gautier & Cristina Conflitti & Riemer P. Faber & Brian Fabo & Ludmila Fadejeva & Valentin Jouvanceau & Jan-Oliver Menz & Teresa Messner & Pavlos Petroulas & Pau Roldan-Blanco & Fabio Rumler & Se, 2024. "New Facts on Consumer Price Rigidity in the Euro Area," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(4), pages 386-431, October.
    • Handle: RePEc:aea:aejmac:v:16:y:2024:i:4:p:386-431
    DOI: 10.1257/mac.20220289
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    3. Christophe Blot & Jérôme Creel & François Geerolf & Sandrine Levasseur, 2022. "Heterogeneity of inflation in the euro area: more complicated than it seems," SciencePo Working papers Main hal-03970416, HAL.
    4. Hugh Montag & Daniel Villar, 2022. "Price-Setting During the Covid Era," Economic Working Papers 547, Bureau of Labor Statistics.
    5. Thomas Y. Mathä & Moritz Osterhuber & Ladislav Wintr, 2022. "Consumer price behaviour in Luxembourg: New evidence from micro price data for 2005-2017," BCL Bulletin Analyses, Central Bank of Luxembourg, vol. 2022, pages 75-84.
    6. Christian Beer & Robert Ferstl & Bernhard Graf & Fabio Rumler, 2023. "Grocery price setting in times of high inflation: what webscraped data tell us," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q4/22-Q1/, pages 43-54.
    7. Consolo, Agostino & Koester, Gerrit & Nickel, Christiane & Porqueddu, Mario & Smets, Frank, 2021. "The need for an inflation buffer in the ECB’s price stability objective – the role of nominal rigidities and inflation differentials," Occasional Paper Series 279, European Central Bank.
    8. Koester, Gerrit & Lis, Eliza & Nickel, Christiane & Osbat, Chiara & Smets, Frank, 2021. "Understanding low inflation in the euro area from 2013 to 2019: cyclical and structural drivers," Occasional Paper Series 280, European Central Bank.
    9. Raza, Hamid & Laurentjoye, Thibault & Randrup Byrialsen, Mikael & Valdecantos, Sebastián, 2023. "Resurgence of inflation: Assessing the role of macroeconomic policies," Nülan. Deposited Documents 4080, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    10. Raza, Hamid & Laurentjoye, Thibault & Byrialsen, Mikael Randrup & Valdecantos, Sebastian, 2023. "Inflation and the role of macroeconomic policies: A model for the case of Denmark," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 32-43.
    11. Menz, Jan-Oliver & Wieland, Elisabeth & Mehrhoff, Jens, 2022. "Estimating the impact of quality adjustment on consumer price inflation," Discussion Papers 49/2022, Deutsche Bundesbank.
    12. Teresa Messner & Fabio Rumler, 2023. "Inflation expectations of Austrian households and firms amid high inflation," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q4/22-Q1/, pages 55-66.
    13. Raza, Hamid & Laurentjoye, Thibault & Randrup Byrialsen, Mikael & Valdecantos, Sebastián, 2023. "Inflation and the role of macroeconomic policies: A model for the case of Denmark," Nülan. Deposited Documents 4077, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    14. Kornilia Vikelidou & Athanasios Tagkalakis, 2022. "Banking union: state of play and proposals for the way forward," Working Papers 303, Bank of Greece.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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