https://doi.org/10.52903/wp2026357
CONSUMER PRICE STICKINESS IN THE EURO AREA DURING AN INFLATION SURGE
Erwan Gautier
Banque de France and Université Paris-Dauphine
Cristina Conflitti
Banca d'Italia
Daniel Enderle
Oesterreichische Nationalbank and Vienna University of Economics and Business
Ludmila Fadejeva
Latvijas Banka
Alex Grimaud
Oesterreichische Nationalbank and TU Wien
Eduardo Gutiérrez
Banco de España
Valentin Jouvanceau
ECB and Lietuvos Bankas
Jan-Oliver Menz
Deutsche Bundesbank
Alari Paulus
Eesti Pank
Pavlos Petroulas
Bank of Greece
Pau Roldan-Blanco
Universitat Autònoma de Barcelona, Barcelona School of Economics and CEPR
Elisabeth Wieland
ECB and Deutsche Bundesbank
ABSTRACT
We use CPI micro data for nine euro area countries to document new evidence on consumer price stickiness in the euro area during the 2021-2024 inflation cycle. In 2022, the monthly frequency of price changes reached 12\%, compared with an average of 8 before falling quickly in 2023 and more slowly in 2024, ending close to its pre-pandemic level. The decline in the frequency of price changes was faster for food and non-energy industrial goods (NEIG) than for services, where frequencies remained elevated in 2024. The overall frequency rose mainly because there were more price increases, while the magnitude of the average size of the price increases or decreases changed only marginally during the surge. Products with a larger imported-energy cost share responded more strongly, and hazard-rate evidence shows that the probability of price adjustments increases with the gap between actual and optimal prices, consistent with state-dependent pricing and a steepening of the Phillips curve. To illustrate the implications of this state dependence, a macro model suggests that peak inflation would have been almost 1 percentage point lower if the frequency had not responded to the inflation surge.
JEL Classification: E31, E52, F33, L11
Keywords: Price rigidity, euro area, inflation surge, micro price data
Acknowledgments: We are grateful to Emmanuel Dhyne, Francesco Lippi, Marianna Riggi, Alessandro Secchi, Daniel Villar, Giordano Zevi, Hélène Zimmer, and seminar participants at the ECB (Frankfurt, 2025), the Central Bank of Latvia (Riga, 2024) and participants at the workshop of the Eurosystem ChaMP Research Network (Vienna, 2025) for insightful comments and suggestions. We also thank Cédric Duprez, Hélène Zimmer and Riemer Faber for their help with the input-output calculations. We would also like to thank the national statistics institutes for granting access to their micro price datasets. Erwan Gautier thanks the Centre d'Accès Sécurisé Distant (CASD–Centre d’accès sécurisé aux données (Ref. 10.34724/CASD) for providing remote access to the French data. Part of this research was carried out when Pau Roldan-Blanco was a research economist at the Banco de Espa\~na and Associated Faculty at CEMFI. Roldan-Blanco acknowledges financial support from the Severo Ochoa Programme for Centres of Excellence in R\&D (Barcelona School of Economics CEX2024-000915-S), funded by MCIN/AEI/10.13039/501100011033. The views expressed in this paper are those of the authors and do not necessarily reflect those of the National Central Banks nor the Eurosystem.
Correspondence:
Erwan Gautier
Banque de France and Université Paris-Dauphine
email: erwan.gautier@banque-france.fr