Energy Price Shocks and Inflation in the Euro Area
Author : Stefano Neri
Publisher :
Page : 0 pages
File Size : 24,21 MB
Release : 2023
Category :
ISBN :
Energy Price Shocks and Inflation in the Euro Area
Author :
Publisher :
Page : 0 pages
File Size : 50,11 MB
Release : 2023
Category :
ISBN :
Book Description
Energy Shocks in the Euro Area
Author : Chiara Casoli
Publisher :
Page : 0 pages
File Size : 38,71 MB
Release : 2022
Category :
ISBN :
Book Description
We develop a Bayesian Structural VAR (SVAR) model to study the relationship between different kinds of energy shocks and inflation dynamics in Europe. Specifically, we include in our specification two separate energy markets (oil and natural gas) and two target macroeconomic variables, measuring inflation expectations and the realized headline inflation. Our results demonstrate that, during the last year, inflation in the Euro area is more affected from energy price shocks, particularly those coming from the natural gas sector. The high peaks of the Eurozone inflation are mainly associated with gas consumption demand shocks and, to a lesser extent, to oil and gas supply shocks.
Euro Area Inflation After the Pandemic and Energy Shock: Import Prices, Profits and Wages
Author : Mr. Niels-Jakob H Hansen
Publisher : International Monetary Fund
Page : 22 pages
File Size : 35,50 MB
Release : 2023-06-23
Category : Business & Economics
ISBN :
Book Description
We document the importance of import prices and domestic profits as a counterpart to the recent increase in euro area inflation. Through a novel consumption deflator decomposition, we show that import prices account for 40 percent of the average change in the consumption deflator over 2022Q1 – 2023Q1, while domestic profits account for 45 percent. The increase in nominal profits was largest in sectors benefiting from increasing international commodity prices and those exposed to recent supply-demand mismatches. While the results show that firms have passed on more than the nominal cost shock, and have fared relatively better than workers, the limited available data does not point to a widespread increase in markups. Looking ahead, assuming nominal wage growth of around 4.5 percent over 2023-24 – slightly below the level seen in Q1 2023 – and broadly unchanged productivity, a normalization of the profit share to the average level over 2015-19 will be necessary to achieve a convergence of inflation to target over the next two years. Monetary policy will thus need to remain restrictive to anchor expectations and maintain subdued demand such that workers and firms settle on relative price setting that is consistent with disinflation.
Oil Price Shocks and Inflation
Author : Lutz Kilian
Publisher :
Page : 0 pages
File Size : 31,14 MB
Release : 2023
Category : Inflation (Finance)
ISBN :
Book Description
Despite growing interest in the impact of oil and other energy price shocks on inflation and inflation expectations, until recently this question has not received much attention. This survey not only presents empirical results for the U.S. economy, but expands the analysis to include other major economies. We find that only in the Euro area and in the U.K. energy price shocks are associated with a material increase in core consumer prices. This helps explain the somewhat more persistent response of headline inflation in these countries than in the U.S. or Canada. Inflation is even less sensitive to energy price shocks in Japan. We document that energy price shocks played a more important role in explaining headline inflation in the Euro area in 2021 and 2022 than in the U.S. This does not mean that energy price shocks have de-anchored inflation expectations, however. While suitable data on long-run inflation expectations are scant, neither for the U.S. nor the U.K. is there evidence that energy price shocks have materially changed long-run inflation expectations.
The Distributional Implications of the Impact of Fuel Price Increases on Inflation
Author : Mr. Kangni R Kpodar
Publisher : International Monetary Fund
Page : 34 pages
File Size : 21,50 MB
Release : 2021-11-12
Category : Business & Economics
ISBN : 1616356154
Book Description
This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.
The 2020-2022 Inflation Surge Across Europe: A Phillips-Curve-Based Dissection
Author : Chikako Baba
Publisher : International Monetary Fund
Page : 25 pages
File Size : 27,16 MB
Release : 2023-02-10
Category : Business & Economics
ISBN :
Book Description
In 2021-22, inflation in Europe soared to multidecade highs, consistently exceeding policymakers’ forecasts and surprising with its wide cross-country dispersion. This paper analyzes the key drivers of the inflation surge in Europe and its variation across countries. The analysis highlights significant differences in Phillips curve parameters across Europe’s economies. Inflation is more sensitive to domestic slack and external price pressures in emerging European economies compared to their advanced counterparts, which contributed to a greater passthrough of global commodity price shocks into domestic prices, and, consequently, to larger increases in inflation rates. Across Europe, inflation also appears to have become increasingly backward looking and more sensitive to commodity price shocks since the onset of the COVID-19 pandemic. This finding helps explain why conventional (Phillips curve) inflation models consistently underpredicted the 2021-2022 inflation surge, although it remains too early to conclude there has been a structural break in the inflation process.
Second-Round Effects of Oil Price Shocks -- Implications for Europe’s Inflation Outlook
Author : Chikako Baba
Publisher : International Monetary Fund
Page : 40 pages
File Size : 37,92 MB
Release : 2022-09-09
Category : Business & Economics
ISBN :
Book Description
The pass-through effects of oil price shocks on wage and consumer price inflation vary with the states or structural characteristics of an economy. The effects have declined over time in Europe and been higher in emerging European economies than in advanced economies. The pass-through to wages is found to have been higher when the prevailing level of inflation was higher or when the degrees of unionization and centralized bargaining were higher, while lower under a higher credibility of monetary policy. The effects of oil price shocks on core inflation and inflation expectations are consistent with their effects on wages.
Determinants of Inflation in the Euro Area
Author : Ms.Florence Jaumotte
Publisher : International Monetary Fund
Page : 36 pages
File Size : 20,69 MB
Release : 2012-01-01
Category : Business & Economics
ISBN : 1463983646
Book Description
While inflation differentials in a monetary union can be benign, reflecting a catch-up process, or an adjustment mechanism to asymmetric shocks or different business cycles, they may also indicate distortions related to inefficiencies in domestic product and labor markets that amplify or make more persistent the impact of shocks on inflation. The paper examines the determinants of inflation differentials in the euro area, with emphasis on the role of country specific labor and product market institutions. The analysis uses a traditional backward-looking Phillips curve equation and augments it to explore the role of collective bargaining systems, union density, employment protection, and product market regulation. The model is estimated over a panel dataset of 10 euro area countries over the period 1983-2007. Results show that high employment protection, intermediate coordination of collective bargaining, and high union density increase the persistence of inflation. Oil and raw materials price shocks are also more likely to be accommodated by wage increases when the degree of coordination in collective bargaining is intermediate. These results are robust to different estimation methods, model specifications, and outliers. The paper suggests that reforming labor market institutions may improve the functioning of the euro area by reducing the risk of persistent inflation differentials.
Unconventional Fiscal Policy in Times of High Inflation
Author : Mai Dao
Publisher : International Monetary Fund
Page : 62 pages
File Size : 22,85 MB
Release : 2023-09
Category : Business & Economics
ISBN :
Book Description
The surge in energy prices in 2022 has been a defining factor behind the increase in euro area inflation. We assess the impact of “unconventional fiscal policy,” defined as the set of fiscal measures, possibly expansionary, motivated by a desire to mute the effects of the increase in energy prices and to lower inflation. Overall, we find that these unconventional measures reduced euro area inflation by 1 to 2 percentage points in 2022 and may avoid an undershoot later on. When nonlinearities in the Phillips curve are taken into account, the net effect is to reduce inflation by about 0.5 percentage points in 2021-24, and keep it nearer to its target. About one-third to one-half of the reduction in 2022 reflects the direct effects of the measures on headline inflation, with much of the remainder reflecting the lower pass-through to core inflation. The fiscal measures were deficit-financed but had limited effects on raising inflation by stimulating demand and instead modestly helped to stabilize longer-term inflation expectations. Looking ahead, the prospective decline in inflation in the euro area is partly due to fortunate circumstances, with energy prices falling from their 2022 peaks and their pass-through effects fading, and with less economic overheating than in economies such as the United States. Implementing similar measures in the face of a more persistent increase in energy prices, or in a more overheated economy, would have caused a more persistent rise in core inflation.
