Inflation Persistence and Price-Setting Behaviour in the Euro Area: A Summary of the Inflation Persistence Network Evidence

Abstract

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The dynamic effects of shocks to wages and prices in the United States and the Euro Area

“…In turn, the relative in ‡ation persistence documented in this paper is also consistent with the evidence found in the literature based on time series models with aggregate price data, which suggests that persistence of price in ‡ation in the EA might be larger than in the US (see, for instance, Levin and Piger, 2004, Gadzinski and Orlandi, 2004, or Altissimo et al, 2006.…”

“…27 See also Bils and Klenow (2004) and Klenow and Kryvstov (2008) for the US. 28 Altissimo et al (2006) notice that the lower frequency of price changes in the EA cannot be explained by di¤erences in consumption structure, as EA consumption is characterised by a larger share of food products (which change prices frequently) and a smaller share of services (with less frequent…”

The ECB's New Multi-Country Model for the euro area: NMCM — Simulated with rational expectations

“…This range is somewhat shorter than the estimates of Gali and Gertler (1999) and Gali, Gertler and Lopez-Salido (2001), whose estimated average duration was 5 -6 quarters, and markedly below the estimates from DSGE models of the euro area 14 . Our results are, however, strongly supported by a broad range of micro studies that suggest the average duration of price changes in the Euro area ranges from four to …ve quarters, see Álvarez et al (2006) and Altissimo, Ehrmann and Smets (2006). Some other studies suggest that average duration of price changes could be even less than 4 quarters, e.g.…”

Globalisation and OECD consumer price inflation

“…For example, Rudd and Whelan (2005) and O'Reilly and Whelan (2005) find little evidence that inflation persistence in the United States and in the euro area has changed over time, whereas Cogley and Sargent (2001), Clark (2003), Levin and Piger (2004) and Altissimo et al (2006) all suggest that inflation persistence is markedly lower in recent years. Debelle and Wilkinson (2002) find that inflation persistence has declined in Australia and New Zealand, but has risen in the United Kingdom and the United States.…”