Inflation Persistence and Price-Setting Behaviour in the Euro Area - a Summary of the Ipn Evidence

58 Pages Posted: 1 Jun 2006

See all articles by Filippo Altissimo

Filippo Altissimo

Brevan Howard Asset Management LLP

Michael Ehrmann

European Central Bank (ECB); Bank of Canada

Frank Smets

European Central Bank (ECB); KU Leuven - Center for Economic Studies

Date Written: June 2006

Abstract

This paper provides a summary of current knowledge on inflation persistence and price stickiness in the euro area, based on research findings that have been produced in the context of the Inflation Persistence Network. The main findings are: i) Under the current monetary policy regime, the estimated degree of inflation persistence in the euro area is moderate; ii) Retail prices in the euro area are more sticky than in the US; iii) There is significant sectoral heterogeneity in the degree of price stickiness; iv) Price decreases are not uncommon. The paper also investigates some of the policy implications of these findings.

Keywords: Price setting, inflation persistence, monetary policy, EMU

JEL Classification: E31, E42, E52

Suggested Citation

Altissimo, Filippo and Ehrmann, Michael and Smets, Frank, Inflation Persistence and Price-Setting Behaviour in the Euro Area - a Summary of the Ipn Evidence (June 2006). ECB Occasional Paper No. 46. Available at SSRN: https://ssrn.com/abstract=807420

Filippo Altissimo (Contact Author)

Brevan Howard Asset Management LLP ( email )

2nd Floor Almack House
28 King Street
London, SW1Y 6XA
United Kingdom

Michael Ehrmann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344/7327 (Phone)
+49 69 1344/6000 (Fax)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Frank Smets

European Central Bank (ECB) ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49 69 1344 6550 (Phone)
+49 69 1344 6575 (Fax)

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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