Inflation and Output Comovement in the Euro Area : Love at Second Sight?

Author/Editor: Michal Andrle ; Jan Bruha ; Serhat Solmaz
Publication Date: September 11, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper discusses comovement between inflation and output in the euro area. The strength of the comovement may not be apparent at first sight, but is clear at business cycle frequencies. Our results suggest that at business cycle frequency, the output and core inflation comovement is high and stable, and that inflation lags the cycle in output with roughly half of its variance. The strong relationship of output and inflation hints at the importance of demand shocks for the euro area business cycle.
Series: Working Paper No. 13/192
Subject(s): Inflation | Euro Area | Business cycles | Economic growth | Consumer price indexes

Publication Date: September 11, 2013
ISBN/ISSN: 9781475538939/1018-5941 Format: Paper
Stock No: WPIEA2013192 Pages: 26
US$18.00 (Academic Rate:
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