Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?

Detalhes bibliográficos
Autor(a) principal: Lagoa, S.
Data de Publicação: 2012
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10071/3687
Resumo: In the euro area, inflation rates diverged after the creation of the single currency, and started to converge again after mid 2002. Against this background, this paper studies the determinants of inflation differentials in the euro area. We start by using the New Keynesian Phillips Curve (NKPC) to explain inflation differences for a panel of countries. It is found that expected inflation and exchange rate movements are important in causing diverging inflation dynamics, while lagged inflation and exchange rates dynamics are not. Moreover, the Incomplete Competition Model (ICM) adds explanatory power to the NKPC in describing inflation dynamics across countries. Not only the former model is not encompassed by the latter, but also the variables proposed by the ICM turn out as significant: the growth of nominal Unit Labour Cost and the long-run disequilibrium between prices and costs explain inflation differentials.
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spelling Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?InflationBusiness cycleConvergenceNew Keynesian Phillips curveIncomplete competition model.In the euro area, inflation rates diverged after the creation of the single currency, and started to converge again after mid 2002. Against this background, this paper studies the determinants of inflation differentials in the euro area. We start by using the New Keynesian Phillips Curve (NKPC) to explain inflation differences for a panel of countries. It is found that expected inflation and exchange rate movements are important in causing diverging inflation dynamics, while lagged inflation and exchange rates dynamics are not. Moreover, the Incomplete Competition Model (ICM) adds explanatory power to the NKPC in describing inflation dynamics across countries. Not only the former model is not encompassed by the latter, but also the variables proposed by the ICM turn out as significant: the growth of nominal Unit Labour Cost and the long-run disequilibrium between prices and costs explain inflation differentials.2012-08-03T16:20:17Z2012-08-03T00:00:00Z2012-08-03info:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10071/3687eng10.7749/dinamiacet-iul.wp.2011.08Lagoa, S.info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T17:54:10Zoai:repositorio.iscte-iul.pt:10071/3687Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:27:15.176600Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?
title Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?
spellingShingle Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?
Lagoa, S.
Inflation
Business cycle
Convergence
New Keynesian Phillips curve
Incomplete competition model.
title_short Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?
title_full Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?
title_fullStr Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?
title_full_unstemmed Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?
title_sort Determinants of inflation differentials in the euro area: Is the New Keynesian Phillips Curve enough?
author Lagoa, S.
author_facet Lagoa, S.
author_role author
dc.contributor.author.fl_str_mv Lagoa, S.
dc.subject.por.fl_str_mv Inflation
Business cycle
Convergence
New Keynesian Phillips curve
Incomplete competition model.
topic Inflation
Business cycle
Convergence
New Keynesian Phillips curve
Incomplete competition model.
description In the euro area, inflation rates diverged after the creation of the single currency, and started to converge again after mid 2002. Against this background, this paper studies the determinants of inflation differentials in the euro area. We start by using the New Keynesian Phillips Curve (NKPC) to explain inflation differences for a panel of countries. It is found that expected inflation and exchange rate movements are important in causing diverging inflation dynamics, while lagged inflation and exchange rates dynamics are not. Moreover, the Incomplete Competition Model (ICM) adds explanatory power to the NKPC in describing inflation dynamics across countries. Not only the former model is not encompassed by the latter, but also the variables proposed by the ICM turn out as significant: the growth of nominal Unit Labour Cost and the long-run disequilibrium between prices and costs explain inflation differentials.
publishDate 2012
dc.date.none.fl_str_mv 2012-08-03T16:20:17Z
2012-08-03T00:00:00Z
2012-08-03
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dc.identifier.uri.fl_str_mv http://hdl.handle.net/10071/3687
url http://hdl.handle.net/10071/3687
dc.language.iso.fl_str_mv eng
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