Disinflation in Spain: The Recent Experience

Nicolas Sobczak

No 1998/106, IMF Working Papers from International Monetary Fund

Abstract: This paper investigates the causes of the recent disinflation in Spain. A standard Phillips curve model is used to disentangle the contributions of three possible shocks: an adverse demand shock that raises unemployment, a positive supply shock resulting from relative price adjustments or structural improvements in the labor market, and a credibility shock that lowers inflationary expectations. The main element underlying Spain’s recent disinflation appears to be a fall in inflation expectations, thanks to the country’s commitment to participate in Economic and Monetary Union from the start, and policy actions geared to that end.

Keywords: WP; inflation expectation; output-inflation tradeoff; food price inflation; output-inflation relationship; energy price inflation; inflation model; targeting inflation; year-on-year inflation; Inflation; Disinflation; Wage bargaining; Output gap; Real wages; Europe (search for similar items in EconPapers)
Pages: 30
Date: 1998-08-01
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1998/106

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