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32 posts on "Euro Area"
July 18, 2011

Which Firms Have Flexible Prices?

Since the 1930s, the conventional wisdom among economists has held that producer prices are more rigid than consumer prices. The roots of this view lie in the 1930s-era “administered price” thesis, which states that large firms set their prices more rigidly than do small firms. In this post, we report that this old “fact” is not true. We instead find that the prices set by large firms are much more flexible than those set by small firms. A key implication of this finding is that policymakers concerned about inflation or deflation should pay particular attention to changes in large firms’ prices.

Posted at 10:00 am in Euro Area, Inflation, Macroeconomics | Permalink
May 31, 2011

Did Unconventional Policy Responses to the Crisis Work? Evidence from a Cross‑Country Analysis

The 2008-09 global recession produced a significant loss of output and a deflationary scare in many countries. The depth, scale, and duration of the crisis triggered monetary and fiscal policy actions that were “unconventional” in terms of their size and scope, leading to an ongoing debate over the role that these policy responses played in the stabilization process. How and to what extent were these policies effective? In this post, we examine cross-country experiences and find evidence consistent with the idea that the policies contributed to the stabilization process through their effect on expectations of output and inflation.

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