Administered Prices in the Eurozone: Some Empirical Data

AdministeredPricesintheEurozone: SomeEmpirical Data

Fabiani et al. (2006) provide empirical evidence of the extent of administered prices in Eurozone nations from a number of surveys and studies.

The data are below:

Nation | Total PercentageofMarkupPrices
Belgium | 46%

Spain | 52%

Italy | 42%

Netherlands | 56%

Portugal | 65%

Euro Area | 54% (average for whole Euro Area)

(Fabiani et al. 2006: 18, Table 4).

It is very striking indeed that for the Eurozone as a whole the average is 54% – a majority of prices.

It is also very telling that the number of prices affected by government regulation or controls is far lower than the percentage of prices directly administered and made relatively inflexible by private sector businesses themselves.

This can be seen here in the category Fabiani et al. call “other” price-setting rules:

Nation | Total Percentageof “Other” Prices*
Belgium | 18%

Spain | 21%

Italy | 26%

Netherlands | 21%

Portugal | 23%

Euro Area | 18% (average for whole Euro Area)

* N.B. This category also seems to refer to other types of price setting apart from government regulation.
(Fabiani et al. 2006: 18, Table 4).

Furthermore, Fabiani et al. have a second category of prices called “competitors’ prices,” which describe prices influenced by pricing of competitors. This does refer to many types of flexprices, but may possibly conceal some administered prices too, so that the first percentages given above may be underestimates.

Unfortunately, total percentages for Germany and France are not given, but data for goods (as opposed to services) markets are:

Nation | Percentage of Markup Prices for Goods
Germany | 73%

France | 40%
(Fabiani et al. 2006: 18, Table 4).

It is striking how high the percentage of administered prices is for goods markets in Germany: it stands at 73%.

Fabiani, S., M. Druant, I. Hernando, C. Kwapil, B. Landau, C. Loupias, F. Martins, T. Mathä, R. Sabbatini, H. Stahl and A. Stokman. 2006. “What Firms’ Surveys tell us about Price-Setting Behavior in the Euro Area,” International Journal of Central Banking 2.3: 3–47.

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