This paper synthesises the implications of recent statistical evidence regarding inflation persistence in the euro area. For aggregate data, the degree of inflation persistence appears to be very high for sample periods spanning multiple decades but falls dramatically once we allow for time...

This paper evaluates new evidence on price-setting practices and inflation persistence in the euro area with respect to its implications for macro modeling. It argues that several of the most commonly used assumptions in micro-founded macro models are seriously challenged by the new findings....