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

Authors


  • We thank two anonymous referees whose comments and suggestions helped us to significantly improve our manuscript. This paper is based on a set of studies, each related to a euro-area country, conducted in the context of the Eurosystem's Inflation Persistence Network (IPN). The contribution of many other members of this network and co-authors of national studies (Luis Álvarez, Pablo Burriel, David Cornille, Monica Dias, Silvia Fabiani, Angela Gattulli, Claire Loupias, Pedro Neves, Patrick Sevestre, and Giovanni Veronese) is gratefully acknowledged. The authors would also like to thank Hervé Le Bihan and Carlos Robalo Marques for their helpful comments and suggestions. The opinions expressed in the papers are those of the authors and do not necessarily reflect the views of the ECB or of the National Central Bank to which they are affiliated.

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.

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