On December 15, 2005, the Oesterreichische Nationalbank (OeNB) held a workshop on “Price Setting and Inflation Persistence in Austria.” The aim of this workshop was to discuss the OeNB's recent research results in the field of price dynamics and inflation1 with policymakers and the...

The marketplace, along with its price system, is the single most important institution in a western-style free enterprise economy. The ability of prices to adjust to changes in supply and demand conditions enables the market to function efficiently and lies behind the magical invisible hand...

This paper studies asymmetric price responses of individual firms, via daily retail prices of almost all gasoline stations in the Netherlands and suggested prices of the five largest oil companies over more than two years. I find that 38% of the stations respond asymmetrically to changes in the...

This paper identifies the basic features of the price setting mechanism in the Spanish economy, using a large dataset that contains over 1.1 million price records and covers around 70% of the expenditure on the CPI basket. In particular, the paper identifies differences in the frequency and size...

This paper provides new insight into the relationship between inflation and consumer price setting by examining a large data set of Mexican consumer prices covering episodes of both low and high inflation, as well as the transition between the two. The overall portrait is one in which the...

This paper presents original evidence on price setting in the euro area at the individual level. We use micro data on consumer (CPI) and producer (PPI) prices, as well as survey information. Our main findings are: (i) prices in the euro area are sticky and more so than in the US; (ii) there is...

This paper identifies the basic features of price setting behaviour at the producer level in the Spanish economy using a large dataset containing the micro data underlying the construction of the PPI over the period 1991 1999. The paper explores how these general features are affected by some...

In this paper we argue that pricing is all about price changes, and that the costs of price changes are often simultaneously subtle and substantial. We discuss a framework to deal with the dynamics of changing prices. This framework incorporates customer interpretations of price changes, an...

While price-setting models usually suggest constant or increasing hazard functions for price changes, empirical studies often find decreasing hazards, possibly due to misspecified or neglected heterogeneity. This paper attempts to disentangle the downward bias into various sources: observed and...

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.