Understanding Euro Area Inflation Dynamics: Why So Low for So Long?
IMF Working Papers, August 22, 2018
Source details
- Canonical URL
- Understanding Euro Area Inflation Dynamics: Why So Low for So Long?
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Bibliographic details
- Authors: Yasser Abdih, Li Lin, Anne-Charlotte Paret
- Published: August 22, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484372562.001
Main findings
- Despite closing output gaps and tightening labor markets, inflation has remained low in the euro area.
- Using an augmented Phillips Curve framework, the study finds that the low inflation phenomenon—sometimes attributed to low global inflation—has been primarily caused by a remarkable persistence of inflation, keeping it low despite the reduction in slack.
- This persistence feature is shown to be specific to the euro area (in comparison with the United States).
- Monetary policy needs to stay accommodative to help guide inflation back to target.
Authors and publication
- By Yasser Abdih, Li Lin, Anne-Charlotte Paret
- August 22, 2018
- IMF Working Papers
Methodology and analytical framework
- Framework: augmented Phillips Curve.
- Focus: role of inflation persistence versus global inflation and slack (output gaps, labor market tightness) in explaining low inflation in the euro area.
- Comparative element: contrast with the United States to identify euro-area-specific persistence.
Policy implications and recommendations
- Monetary policy needs to stay accommodative to help guide inflation back to target.
Subjects and keywords
- Subject: Import prices, Inflation, Inflation persistence, Labor, Labor markets, Output gap, Prices, Production
- Keywords: core HICP inflation, Euro area inflation, Global, Import prices, Inflation, inflation development, inflation dynamics, inflation expectation, Inflation persistence, inflation persistence and expectations, inflation process, inflation puzzle, Labor markets, Output gap, Phillips curve, stickier inflation, understanding Euro area inflation dynamics, WP
Content in this bundle
- Understanding Euro Area Inflation Dynamics: Why So Low for So Long?, WP/18/188, August 2018