This introductory essay briefly summarizes the eleven empirical studies of price setting and price adjustment that are included in this special issue. The studies, which use data from several European countries, were conducted as part of the European Central Bank's Inflation Persistence Network

This paper provides a summary of current knowledge on inflation persistence and price stickiness in the euro area, based on research findings that have been produced in the context of the Inflation Persistence Network. The main findings are: i) Under the current monetary policy regime, the...

We show that deviations from long-run stability of product prices are optimal in the presence of endogenous producer entry and product variety in a sticky-price model with monopolistic competition in which price stability would be optimal in the absence of entry. Specifically, a long-run...

This introductory essay briefly summarizes the eleven empirical studies of price setting and price adjustment that are included in this special issue. The studies, which use data from several European countries, were conducted as part of the European Central Bank's Inflation Persistence Network

Three notions of optimal monetary policy are applied to a model in which firms set their prices for multiple periods. The best steady state inflation rate is slightly positive, but the policy that maximizes present discounted welfare leads in the long run to zero inflation. If commitment is not...

Does the zero bound on nominal interest rates constitute an argument against low inflation? The Federal Reserve implements monetary policy with nominal interest rates, which tend to be low when inflation is low. However, in an optimizing model with staggered price setting, the zero bound does...

The Federal Reserve competes with private providers in markets for payment services. The Fed's pricing behavior in these markets should be guided by the goal of efficiency in the provision and distribution of services. The notion of sustainable pricing provides a framework for pursuing that goal

In 1981 the Federal Reserve System adopted a new pricing policy for certain correspondent banking and other services, such as check clearing and settlement, supplied by Reserve Banks. The new policy was mandated by the Monetary Control Act of 1980, which gave all depository institutions equal...

We model the decisions of a multi-product firm that faces a fixed "menu" cost: once it is paid, the firm can adjust the price of all its products. We characterize analytically the steady state firm's decisions in terms of the structural parameters: the variability of the flexible prices, the...

In the Eurozone price stickiness differs among countries. I explore its consequences on the optimal rate of inflation in a two-country model. On the one hand, with local currencies an inflation tax is partly imposed on the foreign country, so it creates incentives to inflate. On the other hand,...