Do global factors spell the end of the Phillips Curve?

Eric McCoy, Matteo Salto and Václav Žďárek

Quarterly Report on the Euro Area (QREA), 2019, vol. 18, issue 1, 23-36

Abstract: This chapter presents evidence that the determinants of domestic inflation present in the traditional Phillips curve framework remain relevant, while quantity-based measures of global shocks are not relevant. While global price shocks mainly related to oil and commodities are significant determinants of domestic inflation, domestic variables remain as significant as ever. These results are relevant as part of the debate on conducting monetary policy. The paper argues that the use of the Phillips curve in the current inflation-targeting framework is still relevant and that any argument against it cannot rely on inflation being determined by global factors.

Keywords: Euro area economy; Phillips curve; global factors; monetary policy; wage inflation (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:euf:qreuro:0181-02

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