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

Author(s): Vítor Gaspar, Andrew Levin, Fernando Manuel Martins and Frank Smets

Publication Date: March 2007

Keyword(s): monetary policy, New Keynesian models, price setting and price stickiness

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

Gaspar, V, Levin, A, Martins, F and Smets, F. 2007. 'Evidence from Surveys of Price-Setting Managers: Policy Lessons and Directions for Ongoing Research'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6227