The Relevance of Supply Shocks for Inflation: The Spanish Case

M.Ángeles Caraballo and Carlos Usabiaga ()

No E2006/17, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: This paper analyses the effects of supply shocks on the Spanish inflation rate. The methodology applied is based on Ball and Mankiw (1995). These authors assume that a good proxy for supply shocks is the third moment of the distribution of price changes, and show that nominal rigidities imply a positive relation between inflation and skewness, that is magnified by the variance of the distribution. The main data used are the monthly consumer price indexes of each region, disaggregated in 57 categories, for the 1993-2005 period. We estimate the relation between mean inflation and the higher moments of the distribution, including several control variables. The analysis has been carried out in two ways: firstly, each region is analysed separately and, secondly, we have used panel data techniques in order to test the homogeneity across regions. Our results point out that Spanish regions show a common pattern with regard to the nominal rigidities detected, and that the Spanish economy is vulnerable to supply shocks.

Keywords: Inflation; nominal rigidities; skewness; supply shocks; Spanish regions (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2006
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Related works:
Journal Article: The relevance of supply shocks for inflation: the spanish case (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:cea:doctra:e2006_17

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