New Facts on Consumer Price Rigidity in the Euro Area

Erwan Gautier, Cristina Conflitti, Riemer P. Faber, Brian Fabo, Ludmila Fadejeva, Valentin Jouvanceau, Jan-Oliver Menz, Teresa Messner, Pavlos Petroulas, Pau Roldan-Blanco, Fabio Rumler, Sergio Santoro, Elisabeth Wieland and Hélène Zimmer
Additional contact information
Cristina Conflitti: Banca d’Italia
Riemer P. Faber: National Bank of Belgium
Teresa Messner: Oesterreichische Nationalbank
Hélène Zimmer: National Bank of Belgium

No 2225, Working Papers from Banco de España

Abstract: Using CPI micro data for 11 euro area countries, covering 60% of the European consumption basket over the period 2010-2019, we document new findings on consumer price rigidity in the euro area: (i) on average 12.3% of prices change each month, compared with 19.3% in the United States; however, when price changes due to sales are excluded, the proportion of prices adjusted each month is 8.5% in the euro area versus 10% in the United States; (ii) the differences in price rigidity are rather limited across euro area countries and are larger across sectors; (iii) the median price increase (decrease) is 9.6% (13%) when including sales and 6.7% (8.7%) when excluding sales; cross-country heterogeneity is more pronounced for the size of the price change than for the frequency; (iv) the distribution of price changes is highly dispersed: 14% of price changes are below 2% in absolute values, whereas 10% are above 20%; (v) the frequency of price changes barely changes with inflation and it responds very little to aggregate shocks; (vi) changes in inflation are mostly driven by movements in the overall size of the price change; when this effect is broken down, variations in the share of price increases have a greater weight than changes in the size of the price increase or in the size of the price decrease. These findings are consistent with the predictions of a menu cost model in a low-inflation environment in which idiosyncratic shocks are a more relevant driver of price adjustments than aggregate shocks.

Keywords: price rigidity; inflation; consumer prices; micro data (search for similar items in EconPapers)
JEL-codes: D40 E31 (search for similar items in EconPapers)
Pages: 109 pages
Date: 2022-07
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 22/Files/dt2225e.pdf First version, July 2022 (application/pdf)

Related works:
Journal Article: New Facts on Consumer Price Rigidity in the Euro Area (2024)
Working Paper: New facts on consumer price rigidity in the Euro Area (2022)
Working Paper: New Facts on Consumer Price Rigidity in the Euro Area (2022)
Working Paper: New facts on consumer price rigidity in the euro area (2022)
Working Paper: New facts on consumer price rigidity in the euro area (2022)
Working Paper: New Facts on Consumer Price Rigidity in the Euro Area (2022)
Working Paper: New Facts on Consumer Price Rigidity in the Euro Area (2022)
Working Paper: New facts on consumer price rigidity in the euro area (2022)
Working Paper: New facts on consumer price rigidity in the euro area (2022)
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