New Evidence on Inflation Persistence and Price Stickiness in the Euro Area: Implications for Macro Modelling

Abstract

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

Published as: New Evidence on Inflation Persistence and Price Stickiness in the Euro Area: Implications for Macro Modeling in Journal of the European Economic Association , Vol. 4, No. 40603, 562--574, January, 2006