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

52 Pages Posted: 21 Sep 2005

See all articles by Emmanuel Dhyne

Emmanuel Dhyne

National Bank of Belgium

Luis J. Álvarez

Banco de España

Hervé le Bihan

Banque de France - Centre de Recherche

Giovanni Veronese

Bank of Italy

Daniel Dias

Bank of Portugal

Johannes Hoffmann

Deutsche Bundesbank - Economics Department

Nicole Jonker

De Nederlandsche Bank (DNB); De Nederlandsche Bank

Patrick Lunnemann

Banque Central du Luxembourg

Fabio Rumler

Oesterreichische Nationalbank

Jouko Vilmunen

Bank of Finland, Research Unit

Date Written: September 2005

Abstract

This paper documents patterns of price setting at the retail level in the euro area, summarized in six stylized facts. First, the average euro area monthly frequency of price adjustment is 15 p.c., compared to about 25 p.c. in the US. Second, the frequency of price changes is characterized by substantial cross product heterogeneity - prices of oil and unprocessed food products change very often, while price adjustments are less frequent for processed food, non energy industrial goods and services. Third, cross country heterogeneity exists but is less pronounced. Fourth, price decreases are not uncommon. Fifth, price increases and decreases are sizeable compared to aggregate and sectoral inflation rates. Sixth, price changes are not highly synchronized across retailers. Moreover, the frequency of price changes in the euro area is related to several factors, such as seasonality, outlet type, indirect taxation, pricing practices as well as aggregate or product specific inflation.

Keywords: Pricesetting, consumer price, frequency of price change

JEL Classification: E31, D40, C25

Suggested Citation

Dhyne, Emmanuel and Álvarez, Luis J. and Le Bihan, Herve and Veronese, Giovanni Furio and Dias, Daniel and Hoffmann, Johannes and Jonker, Nicole and Lunnemann, Patrick and Rumler, Fabio and Vilmunen, Jouko, Price Setting in the Euro Area: Some Stylized Facts from Individual Consumer Price Data (September 2005). ECB Working Paper No. 524. Available at SSRN: https://ssrn.com/abstract=796769

Emmanuel Dhyne (Contact Author)

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Luis J. Álvarez

Banco de España ( email )

Madrid 28014
Spain

Herve Le Bihan

Banque de France - Centre de Recherche ( email )

31 rue Croix des Petits Champs
Room 41-1391
75049 Paris Cedex 01
France

Giovanni Furio Veronese

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy
+49 621 189 1886 (Phone)
+49 621 189 1884 (Fax)

Daniel Dias

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

Johannes Hoffmann

Deutsche Bundesbank - Economics Department ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany
0049 69 9566 2320 (Phone)
0049 69 9566 4317 (Fax)

Nicole Jonker

De Nederlandsche Bank (DNB) ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Patrick Lunnemann

Banque Central du Luxembourg ( email )

2, boulevard Royal
L-2983 Luxembourg
Luxembourg

Fabio Rumler

Oesterreichische Nationalbank ( email )

Otto-Wagner Platz 3
POB 61
Vienna 1011
Austria

Jouko Vilmunen

Bank of Finland, Research Unit ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

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