GVC participation and inflation in the European Union

Mariam Camarero, Antonia López-Villavicencio and Cecilio Tamarit
Additional contact information
Mariam Camarero: University Jaume I and INTECO, Department of Economics, Campus de Riu Sec, E-12080 Castellón, Spain.
Antonia López-Villavicencio: Department of Applied Economics, Building B, Office: B3-052, Universitat Autònoma de Barcelona, 08193 Bellaterra, Barcelona, Spain.
Cecilio Tamarit: niversity of València and INTECO, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building, E-46022 Valencia, Spain.

No 2609, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: This paper examines how participation in global value chains (GVCs) shapes in- flation in the European Union over 1995–2023. Using local projections, we trace the dynamic response of inflation to total, backward and forward GVC shocks, at the aggregate level and across core, peripheral and CEEC economies. GVC integra- tion is, on average, disinflationary, supporting the discipline-on-prices hypothesis. The aggregate result, however, masks substantial heterogeneity: backward sourcing dampens prices in core and CEEC countries, forward linkages generate demand-pull in core suppliers and competitive discipline in CEECs, while peripheral economies behave as price-takers. Results are robust to first-differencing.

Keywords: Global value chains; inflation; Phillips curve; local projections; European Union. (search for similar items in EconPapers)
JEL-codes: E31 F14 F41 F62 (search for similar items in EconPapers)
Date: 2026-05
New Economics Papers: this item is included in nep-eec and nep-mon
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