Series: Featured research.
Author: Erwan Gautier, Cristina Conflitti, Riemer P. Faber, Brian Fabo, Ludmila Fadejeva, Valentín Jouvanceau, Jan-Oliver Menz, Teresa Messner, Pavlos Petroulas, Pau Roldán Blanco, Fabio Rumler, Sergio Santoro, Elisabeth Wieland and Hélêne Zimmer I.
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Summary
In this paper, we build a novel dataset with 135 million pricing quotes from 11 euro area countries (including the largest ones), representing about 60% of the euro area consumption basket, to document various facts regarding price rigidity in the low inflation period from 2010 to 2019. We find that prices are sticky, with 12.3% of prices changing every month on average (8.5% when excluding sales), and a median price increase (respectively, decrease) of 9.6% (respectively, 13%). There are small differences between countries, and larger differences across sectors. Although neither frequency nor size exhibit significant time trends, we find that the latter is a much more important contributor to the overall inflation dynamics. Moreover, firms respond to aggregate supply and demand shocks by changing the size of their price adjustments but not the frequency.