Evidence from Surveys of Price-Setting Managers: Policy Lessons and Directions for Ongoing Research

25 Pages Posted: 22 May 2008

See all articles by Vítor Gaspar

Vítor Gaspar

Bank of Portugal

Andrew T. Levin

affiliation not provided to SSRN

Fernando Manuel Martins

affiliation not provided to SSRN

Frank Smets

European Central Bank (ECB); KU Leuven - Center for Economic Studies

Date Written: March 2007

Abstract

Understanding the features and the determinants of individual price setting behaviour is important for the formulation of monetary policy. These behavioural mechanisms play a fundamental role in influencing the characteristics of aggregate inflation and in determining how monetary policy affects inflation and real economic activity. The Inflation Persistence Network, a collaborative research effort of the Eurosystem, analysed a large number of panel data sets of individual price records and conducted surveys of price-setting managers in many euro area countries. This paper discusses to what extent the extensive evidence coming from those two data sources provides support for some basic elements of the New Keynesian perspective. It analyses the implications of the micro evidence for distinguishing between competing theories of price stickiness and provides some brief reflections about the lessons for monetary policy.

Keywords: Monetary policy, New Keynesian models, price setting, price stickiness

JEL Classification: D4, E1, E3

Suggested Citation

Gaspar, Vítor and Levin, Andrew and Martins, Fernando Manuel and Smets, Frank, Evidence from Surveys of Price-Setting Managers: Policy Lessons and Directions for Ongoing Research (March 2007). CEPR Discussion Paper No. DP6227, Available at SSRN: https://ssrn.com/abstract=1135467

Vítor Gaspar (Contact Author)

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

Andrew Levin

affiliation not provided to SSRN

Fernando Manuel Martins

affiliation not provided to SSRN

No Address Available

Frank Smets

European Central Bank (ECB) ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49 69 1344 6550 (Phone)
+49 69 1344 6575 (Fax)

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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