DOI:  https://doi.org/10.52903/wp2022302


Erwan Gautier
Banque de France

Cristina Conflitti
Banca d'Italia

Riemer P. Faber
National Bank of Belgium

Brian Fabo
National Bank of Slovakia

Ludmila Fadejeva
Latvijas Banka

Valentin Jouvanceau
Lietuvos Bankas

Jan-Oliver Menz
Deutsche Bundesbank

Teresa Messner
Oesterreichische Nationalbank

Pavlos Petroulas
Bank of Greece

Pau Roldan-Blanco
Banco de España

Fabio Rumler
Oesterreichische Nationalbank

Sergio Santoro
European Central Bank

Elisabeth Wieland
Deutsche Bundesbank

Hélène Zimmer
National Bank of Belgium


Using CPI micro data for 11 euro area countries covering about 60% of the euro area consumption basket over the period 2010-2019, we document new findings on consumer price rigidity in the euro area: (i) each month on average 12.3% of prices change, which compares with 19.3% in the United States; when we exclude price changes due to sales, however, the proportion of prices adjusted each month is 8.5% in the euro area versus 10% in the United States; (ii) differences in price rigidity are rather limited across euro area countries but much larger across sectors; (iii) the median price increase (resp. 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 than for the frequency of price changes; (iv) the distribution of price changes is highly dispersed: 14% of price changes in absolute values are lower than 2% whereas 10% are above 20%; (v) the overall frequency of price changes does not change much with inflation and does not react much to aggregate shocks; (vi) changes in inflation are mostly driven by movements in the overall size; when decomposing the overall size, changes in the share of price increases among all changes matter more than movements in the size of price increases or the size of price decreases. These findings are consistent with the predictions of a menu cost model in a low inflation environment where idiosyncratic shocks are a more relevant driver of price adjustment than aggregate shocks.

Keywords: price rigidity, inflation, consumer prices, micro data.
JEL-classifications: D40, E31

Acknowledgement: We would like to thank the national statistics institutes for providing us with micro datasets on consumer prices. Our thanks also go to an anonymous referee of the ECB WP series, David Argente for his discussion, Fernando Alvarez, Luca Dedola, Paolo Del Giovane, Emmanuel Dhyne, Yuriy Gorodnichenko, Johannes Hoffmann, Peter Karadi, Herve Le Bihan, Francesco Lippi, Anton Nakov, Stefano Neri, Raphael Schoenle, Michael Weber, Giordano Zevi, Roberta Zizza, and participants in the PRISMA Eurosystem network, the ASSA 2022 Conference, the ECB-FRB Cleveland Inflation Conference, the participants in internal seminars at the Oesterreichische Nationalbank, National Bank of Belgium, and Banque de France for their comments and suggestions. We would like to thank Ladislav Wintr and Thomas Mathä for analysis of the Luxembourg data and Sotiris Blanas for contributing to the Belgian data analysis. Moreover, we are grateful to Dhyne et al. (2006) for providing us with the product level results of their study. Erwan Gautier also 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. Concerning the underlying CPI micro data, we are especially grateful to Michaela Maier (Statistik Austria), Natalja Dubkova (Central Statistical Bureau of Latvia), Malte Kaukal and Markus Stahl (Hessian Statistical Office), Ken Van Loon (Statbel), and Alessandro Brunetti and Rosabel Ricci (ISTAT) for explaining to us the underlying data in great detail. The views expressed are those of the authors and do not necessarily reflect those of the national central banks or the Eurosystem.

Erwan Gautier
Banque de France
31 rue Croix des Petits-Champs
75049 Paris Cedex01, France
Phone: +33 1 42 92 48 35
Email: erwan.gautier@banque-france.fr


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