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Pricing behaviour in the euro area : results of a Eurosystem survey

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  • M. Druant

    (National Bank of Belgium, Research Department)

Abstract

The article presents the results of surveys on several qualitative aspects of pricing behaviour, conducted within the framework of the Eurosystem Inflation Persistence Network (IPN). The surveys cover more than 11,000 firms in nine euro area countries. Despite some methodological differences between the surveys of individual countries, the results are quite similar in many respects. They reveal a relatively high degree of price rigidity, as the median firm changes prices once a year. The pricing behaviour may be both time-dependent and state-dependent. These findings are in line with IPN conclusions on the quantitative analysis of the pricing of goods and services. Furthermore, the surveys show that the environment in which the European firms operate deviates significantly from a perfect competition situation and that, in line with the basic premises of the new-Keynesian literature, firms do have market power and apply various forms of price discrimination. In addition, the surveys provide evidence that cost changes are more important for price increases than for price cuts, whereas changes in market conditions have a greater impact in the case of price cuts. The factors explaining price rigidity relate to the existence of implicit or explicit contracts, whereas menu costs or information-gathering costs are not regarded as major obstacles to price adjustments. The flatness of the marginal costs curve and the fact that firms are reluctant to be the first to change prices, are also seen as important impediments to price adjustments.

Suggested Citation

  • M. Druant, 2005. "Pricing behaviour in the euro area : results of a Eurosystem survey," Economic Review, National Bank of Belgium, issue iii, pages 79-86, September.
  • Handle: RePEc:nbb:ecrart:y:2005:m:september:i:iii:p:79-86
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    File URL: https://www.nbb.be/en/articles/pricing-behaviour-euro-area-results-eurosystem-survey
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    References listed on IDEAS

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    4. Loupias, Claire & Ricart, Roland, 2004. "Price setting in France: new evidence from survey data," Working Paper Series 423, European Central Bank.
    5. Silvia Fabiani & Martine Druant & Ignacio Hernando & Claudia Kwapil & Bettina Landau & Claire Loupias & Fernando Martins & Thomas Mathä & Roberto Sabbatini & Harald Stahl & Ad Stokman, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
    6. Apel, Mikael & Friberg, Richard & Hallsten, Kerstin, 2005. "Microfoundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 313-338, April.
    7. Aucremanne, Luc & Druant, Martine, 2005. "Price-setting behaviour in Belgium: what can be learned from an ad hoc survey?," Working Paper Series 448, European Central Bank.
    8. L. Aucremanne & M. Druant, 2004. "Price-setting behaviour in Belgium : what can be learned from an ad hoc survey ?," Economic Review, National Bank of Belgium, issue iv, pages 17-47, December.
    9. Kwapil, Claudia & Baumgartner, Josef & Scharler, Johann, 2005. "The price-setting behavior of Austrian firms: some survey evidence," Working Paper Series 464, European Central Bank.
    10. Luc Aucremanne & Martine Druant, 2005. "Price-setting behaviour in Belgium: what can be learned from an ad hoc survey ?," Working Paper Research 65, National Bank of Belgium.
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    Cited by:

    1. Bampinas, Georgios & Panagiotidis, Theodore, 2016. "Hedging inflation with individual US stocks: A long-run portfolio analysis," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 374-392.
    2. Terranova, Roberta & Turco, Enrico M., 2022. "Concentration, stagnation and inequality: An agent-based approach," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 569-595.
    3. J. Jonckheere & H. Zimmer, 2017. "Services inflation : The Belgian exception," Economic Review, National Bank of Belgium, issue i, pages 93-109, June.

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    More about this item

    Keywords

    pricing behaviour; price rigidity; survey; time-dependent pricing; state-dependent pricing; price discrimination; Eurosystem;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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