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

60 Pages Posted: 21 Oct 2010

See all articles by Philip Vermeulen

Philip Vermeulen

European Central Bank (ECB)

Daniel Dias

Bank of Portugal

Maarten Dossche

National Bank of Belgium

Erwan Gautier

Banque de France - Centre de Recherche

Ignacio Hernando

Banco de España

Roberto Sabbatini

Bank of Italy

Harald Stahl

Deutsche Bundesbank - Economics Department

Date Written: February 2007

Abstract

This paper documents producer price setting in 6 countries of the euro area: Germany, France, Italy, Spain, Belgium and Portugal. It collects evidence from available studies on each of those countries and also provides new evidence. These studies use monthly producer price data. The following five stylised facts emerge consistently across countries. First, producer prices change infrequently: each month around 21% of prices change. Second, there is substantial cross-sector heterogeneity in the frequency of price changes: prices change very often in the energy sector, less often in food and intermediate goods and least often in non-durable non-food and durable goods. Third, countries have a similar ranking of industries in terms of frequency of price changes. Fourth, there is no evidence of downward nominal rigidity: price changes are for about 45% decreases and 55% increases. Fifth, price changes are sizeable compared to the inflation rate. The paper also examines the factors driving producer price changes. It finds that costs structure, competition, seasonality, inflation and attractive pricing all play a role in driving producer price changes. In addition producer prices tend to be more flexible than consumer prices.

Keywords: Price-setting, producer prices

JEL Classification: E31, D40, C25

Suggested Citation

Vermeulen, Philip and Dias, Daniel and Dossche, Maarten and Gautier, Erwan and Hernando, Ignacio and Sabbatini, Roberto and Stahl, Harald, Price Setting in the Euro Area: Some Stylised Facts from Individual Producer Price (February 2007). Banque de France Working Paper No. 164. Available at SSRN: https://ssrn.com/abstract=1694544 or http://dx.doi.org/10.2139/ssrn.1694544

Philip Vermeulen (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Daniel Dias

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

Maarten Dossche

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Erwan Gautier

Banque de France - Centre de Recherche ( email )

31 rue Croix des Petits Champs
75049 Paris Cedex 01
France

Ignacio Hernando

Banco de España ( email )

Madrid 28014
Spain
+34 91 338 5186 (Phone)
+34 91 338 5678 (Fax)

Roberto Sabbatini

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Harald Stahl

Deutsche Bundesbank - Economics Department ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

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