Are Non-Euro Area EU Countries Importing Low Inflation from the Euro Area?

Are Non-Euro Area EU Countries Importing Low Inflation from the Euro Area?
Author :
Publisher : International Monetary Fund
Total Pages : 34
Release :
ISBN-10 : 9781484389751
ISBN-13 : 1484389751
Rating : 4/5 (751 Downloads)

Book Synopsis Are Non-Euro Area EU Countries Importing Low Inflation from the Euro Area? by : Mr.Plamen Iossifov

Download or read book Are Non-Euro Area EU Countries Importing Low Inflation from the Euro Area? written by Mr.Plamen Iossifov and published by International Monetary Fund. This book was released on 2014-10-22 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The synchronized disinflation across Europe since end-2011 raises the question of whether non-euro area EU countries are affected by the undershooting of the euro area inflation target. To shed light on this issue, we estimate an open-economy, New Keynsian Phillips curve, in which we control for imported inflation. Regression results suggest that falling food and energy prices have been the main disinflationary driver. But low core inflation in the euro area has also had a clear and significant impact. Countries with more rigid exchange-rate regimes and higher share of foreign value added in domestic demand have been more affected. The scope for monetary response to low inflation in non-euro area EU countries depends on concerns about financial stability and unanchoring of inflationary expectations, as well as on exchange rate regime and capital flows dynamics.


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