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Price Setting in the Euro Area: Some Stylized Facts from Individual Producer Price Data

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  • PHILIP VERMEULEN
  • DANIEL A. DIAS
  • MAARTEN DOSSCHE
  • ERWAN GAUTIER
  • IGNACIO HERNANDO
  • ROBERTO SABBATINI
  • HARALD STAHL

Abstract

This paper summarizes the microevidence on the setting of producer prices in the euro area. The main findings are: (i) 21% of producer prices are adjusted each month, (ii) producer prices are changed more frequently and by smaller amounts than consumer prices (even after controlling for product characteristics), (iii) price decreases are relatively frequent, (iv) inflation correlates positively with the difference between the frequency of price increases and decreases, and (v) there is substantial variation in price flexibility across sectors, which can be explained in part by differences in the cost structure, the degree of competition, and the level of sectoral inflation.

Suggested Citation

  • Philip Vermeulen & Daniel A. Dias & Maarten Dossche & Erwan Gautier & Ignacio Hernando & Roberto Sabbatini & Harald Stahl, 2012. "Price Setting in the Euro Area: Some Stylized Facts from Individual Producer Price Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(8), pages 1631-1650, December.
    • Handle: RePEc:wly:jmoncb:v:44:y:2012:i:8:p:1631-1650
    DOI: 10.1111/j.1538-4616.2012.00547.x
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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