The “Price Puzzle”

Abstract

We have chosen construction as an example, deliberately, because this sector is usually the first to be hit by the recession and also because of the price bubble that has created an immense stock of unsold houses and apartments in the United States and Europe. We see, all over Europe and particularly in its South, an impressive fact: Although prices adjust, they do so sluggishly and, of course, construction, has not recovered. Despite the large income shocks prices of certain consumption goods have not decreased considerably, and unemployment has increased. In Greece, price adjustments took considerably more time relative to the rest of Europe and, at the same time, they have not adjusted as much.