Cyclical or countercyclical nature of prices and wages in the euro area

Aim/purpose –The aim of the undertaken research is to analyse the interdependencies between cyclical changes in consumer prices, production prices, wages and production in the euro area in the period Q1.2010-Q3.2017. Methodology –A literature review in the field ofmacroeconomics and international finance and statistical and econometric methods were used in this study.Findings –The hypothesis that prices on the market follow the changes in the business cycle is a central aspect in research on business cycles. The results of the conducted research suggest no occurrence of the cyclical phenomenon of consumer prices, producer prices and wages in the examined period of time. Research implications–The findings of the research are extremely important especial-ly from the European Central Bank monetary policy point of view. The lack of cyclical changes in inflation, production prices and wages can lead to asymmetric monetary policy reaction to fluctuations in economic activity.Originality –To date, no comprehensive research has been conducted into the phenomenon of price and wage cyclicality in the euro area. Therefore, this research fills the existing gap in this area, constituting a significant contribution to empirical research in the field of price cyclicality.