The relationship between inflation rates in advanced economies

Luis Alvarez, Ana Gómez Loscos and M.ª Dolores Gadea
Authors registered in the RePEc Author Service: Ana Gómez-Loscos

Economic Bulletin, 2020, issue 1/2020, No 03

Abstract: This article analyses the link between the changes in and the drivers of inflation in a broad range of advanced economies, with special emphasis on those of the euro area. Inflation rates are seen to be highly synchronised across countries, especially in the euro area economies, reflecting their close economic and financial links and the common monetary policy. Also, the comovement of inflation is found to be a phenomenon that tends to be more visible in the medium and long-term. At the same time, the synchronisation of core inflation, which is based on products with more stable prices, is seen to be limited. The interdependence of headline inflation, by contrast, is significantly higher and has increased considerably in recent years. The drivers of inflation, according to New Keynesian Phillips curve models, such as inflation expectations, the cyclical position and external prices, also help to explain the relationship between inflation rates in advanced economies and especially in those of the euro area.

Keywords: Inflation; Phillips curve; comovement; trend inflation (search for similar items in EconPapers)
JEL-codes: C50 E31 E32 (search for similar items in EconPapers)
Date: 2020
Note: Analytical Articles
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