We establish five facts about prices in the U.S. economy: 1) The median implied duration of consumer prices when sales are excluded at the product level is between 8 and 11 months. The median implied duration of finished goods producer prices is 8.7 months. 2) One-third of regular price changes are price decreases. 3) The frequency of price increases responds strongly to inflation while the frequency of price decreases and the size of price increases and price decreases do not. 4) The frequency of price change is highly seasonal: It is highest in the 1st quarter and lowest in the 4th quarter. 5) The hazard function of price changes for individual consumer and producer goods is downward sloping for the first few months and then flat (except for a large spike at 12 months in consumer services and all producer prices). These facts are based on CPI microdata and a new comprehensive data set of microdata on producer prices that we construct from raw production files underlying the PPI. We show that the 1st, 2nd and 3rd facts are consistent with a benchmark menu-cost model, while the 4th and 5th facts are not.

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Based on firm-level data for Belgium over the period 1997-2005, we evaluate the elasticity of labour and average real wage per firm to microeconomic total factor productivity (TFP). We find that the elasticity of wages with respect to TFP is rather low. Our results suggest that sector-level collective bargaining in Belgium leaves limited margin for adjustment of real wages to firm-specific shocks. Next, we report evidence of a positive relationship between hours and technology. Finally, our finding of sluggish wage response in the services sector can be related to the observed higher price stickiness for services than for other goods.

Monitoring pro-cyclicality under the capital requirements directive: preliminary concepts for developing a framework

Downward wage rigidity for different workers and firms an evaluation for Belgium using the IWFP procedure 1 by Philip Du Caju,

Rigid labouR compensation and flexible employment? fiRm-level evidence with RegaRd to pRoductivity foR belgium

evaluating microfoundationS for aggregate Price rigiditieS evidence from matched firm-level data on Product

sectoral differences in downward real wage rigidity workforce composition, institutions,

This report summarises the main findings and policy conclusions of the Eurosystem/ESCB Wage Dynamics Network (WDN) since it started operations in July 2006. The objectives of the WDN were i) to identify the sources and features of wage and labour cost dynamics that are most relevant for monetary policy and ii) to clarify the relationship between wages, labour costs and prices both at the firm and macro-economic level. This was partly motivated by the finding in the Inflation Persistence Network (IPN) that cross-sector differences in the frequency of price changes were highly negatively correlated with the labour share, suggesting that stickiness in wages and labour costs may be one of the driving factors behind the slow adjustment of prices. Most of the analysis summarised in this report is based on data that comes from the period before the intensification of the financial crisis in the third quarter of 2008. However, during the past year an attempt was made to update some of the information (such as the survey) and to investigate to what extent the findings can explain the response of the labour market in the current crisis. Against this background, the report first describes some of the medium-term developments in European labour markets focusing on the recent evolution of collective bargaining and wage setting institutions in the EU and the development of the wage structure in a selected number of EU countries. Wage bargaining institutions (Section 2.1) are an important determinant of both wage dynamics and the