English, Article, Journal or magazine article edition: Inflation Dynamics and the Cross-Sectional Distribution of Prices in the E.U. Periphery Diego Mendez-Carbajo; Dimitrios D. Thomakos; Constantina Kottaridi; ...

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Bookmark: http://trove.nla.gov.au/version/145298
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Inflation Dynamics and the Cross-Sectional Distribution of Prices in the E.U. Periphery
Author
  • Diego Mendez-Carbajo
  • Dimitrios D. Thomakos
  • Constantina Kottaridi
  • Diego MŽndez-Carbajo
Physical Description
  • preprint
Notes
  • RePEc:uop:wpaper:0004
  • We explore the connection between inflation and its higher-order moments for three economies in the periphery of the European Union (E.U.), Greece, Portugal and Spain. Motivated by a micro-founded model of inflation determination, along the lines of the hybrid New Keynesian Phillips curve, we examine whether and how much does the cross-sectional skewness in producer prices affect the path of inflation. We develop our analysis with the perspective of economic integration/​inflation harmonization (in the E.U.) and discuss the peculiarities of these three economies. We find evidence of a strong positive relation between aggregate inflation and the distribution of relative-price changes for all three countries. A potentially important implication of our results is that, if the cross-sectional skewness of prices is directly related to aggregate inflation, not only the direction but also the magnitude of a nominal shock would influence output and inflation dynamics. Moreover, the effect of such a shock could be received asymmetrically, even when countries share a common currency.
  • Inflation; Cross-sectional distribution of prices; Greece, Portugal, Spain; European Union; Harmonization.
  • RePEc:rim:rimwps:43-07
Language
  • English
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