114, no 2, pp. 655 - 690 ; woodford, m. ( 2009 ), “ information - constrained state - dependent pricing ”, journal of monetary economics, vol. 56, pp. 100 - 124 ; stevens, l. ( 2020 ), “ coarse pricing policies ”, the review of economic studies, vol. 87, no 1, pp. 420 - 453. 8. nakamura, e. and steinsson, j. ( 2013 ), “ price rigidity : microeconomic evidence and macroeconomic implications ”, annual review of economics, vol. 5, pp. 133 - 163 ; mackowiak, b. and smets, f. ( 2009 ), “ implications of microeconomic price data for macroeconomic models ”, in fuhrer, j. et al. ( eds. ), understanding inflation and the implications for monetary policy : a phillips curve retrospective, mit press, cambridge, massachusetts. 9. nakamura, e., steinsson, j., sun, p. and villar, d. ( 2018 ), “ the elusive costs of inflation : price dispersion during the u. s. great inflation ”, the quarterly journal of economics, vol. 133, no 4, pp. 1933 - 1980. also, studies of micro price data from high - inflation episodes in mexico and argentina show that the frequency of price changes increases with the inflation rate and becomes noticeably more responsive to inflation when inflation exceeds a level of around 10 %. see gagnon, e. ( 2009 ), “ price setting during low and high inflation : evidence from mexico ”, the quarterly journal of economics, vol. 124, no 3, pp. 1221 - 1263 ; alvarez, f. et al. ( 2011 ), “ from hyperinflation to stable prices : argentina ’ s evidence on menu cost models ”, the quarterly journal of economics, vol. 134, no 1, pp. 451 - 505. 10. the simulations are based on woodford ( 2009 ), op. cit., and costain, j., nakov, a., ( 2019 ), “ logit price dynamics ”, journal of money, credit, and banking, 51, 43 - 78.

, coupled with the provision that medium - term objectives do not necessarily have to be reached within the horizon of a country ’ s stability programme. in sum, the preventive arm of the pact, as recently revised, provides a useful framework for surveillance and benchmarking of sound fiscal policies and the reform might strengthen the pertinent provisions. however, if it is implemented in a minimalist fashion, the required adjustment and fiscal policy paths may not be consistent with determined consolidation, sufficient safety margins and adequate debt reduction. as regards the corrective arm, it should be recalled that the original sgp aimed to strike a balance between the quasi - automatic application of the excessive deficit procedure and the inherent room for discretion in the procedures and in the role of the ecofin council. this combination of automaticity and discretion was intended to deter ( and, if necessary, ensure the prompt correction of ) excessive deficits. and this, in the opinion of the ecb, would anchor expectations of fiscal discipline in emu. the reform of the sgp ’ s corrective arm makes decisions on the existence of excessive deficits and on the setting of deadlines for correcting them less automatic and more explicitly conditional on discretion in the assessments of the underlying economic and budgetary situations. the reform even relaxes certain rules. for example, the softening of the exceptional circumstances clauses and the list of other relevant factors are indicative of the increased discretion and potential relaxation of fiscal discipline. it can, of course, be argued that this enhanced flexibility in assessing the existence and correction of deficits by itself does not impose a looser application of the procedure compared with what was done in the recent past. yet it can facilitate a more lax implementation, which could imply higher and more protracted deficits for a member country and the euro area as a whole. this is a cause for serious concern. ii. implications for the interaction of fiscal and monetary policy the second set of questions i would like to address is as follows : what are the implications of the sgp reform for the interaction of fiscal and monetary policy? and what role should the european central bank play in this context? given the impact of fiscal policies on key macroeconomic variables, it goes without saying that fiscal policies can have significant implications for monetary policy. indeed, the danger that unfettered fiscal policies could create tensions in emu and undermine macroeconomic stability, in general, and monetary policy, in particular, is the raison d ’ etre for the sg