Kingdom of the Netherlands–the Netherlands: Selected Issues

IMF Staff Country Reports, March 9, 2023

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Explores the nature of the recent acceleration of inflation in the Netherlands from multiple perspectives.
Presents different measures of inflation and documents methodological discrepancies among the indicators considered.
Provides an empirical assessment of the main drivers of inflation through a Phillips-Curve estimation.
Analyzes the particularities of the Dutch energy mix compared to other EA peers, and the pass-through from wholesale to retail gas and electricity prices.
Examines distributional aspects of the total remuneration of productive factors—capital (profits) and labor (wages)—and how this distribution has behaved historically amid rising inflation.
Assesses heterogeneous effects of purchasing-power losses across household income quintiles and the uncertain implications for demand and overall economic activity.
Emphasizes the importance of the Dutch economy’s capacity to adapt to the new energy environment and to improve productivity to preserve employment, growth, and profits.

Documents methodological discrepancies across inflation indicators and presents multiple measures of inflation for the Netherlands.
Uses Phillips-Curve estimation to empirically assess main drivers of inflation (modeling approach stated as I. Phillips Curve specification among keywords).
Identifies distinctive features of the Dutch energy mix relative to other euro-area peers and quantifies pass-through dynamics from wholesale to retail gas and electricity prices.
Provides empirical evidence on past distribution of remuneration between capital (profits) and labor (wages), relevant to concerns about a potential wage-price spiral.
Highlights that risks of high inflation persistence increase distributional losses of purchasing power across income quintiles, with unclear net effects on aggregate demand and economic activity.

Strengthen policies that facilitate adaptation to the evolving energy environment to limit negative impacts on employment, growth, and profits.
Support productivity-enhancing measures to absorb energy-price shocks without triggering large wage-price dynamics.
Consider distributional policies or targeted measures to mitigate heterogeneous purchasing-power losses across income quintiles.
Monitor inflation indicators carefully given methodological differences and the potential for persistent inflation dynamics.

Subject: Climate change, Energy prices, Environment, Housing, Inflation, International organization, Monetary policy, National accounts, Natural disasters, Prices
Keywords: Climate change, core inflation composition, Energy prices, flagging housing SUPPLY, Global, government housing policy, Housing, housing affordability, housing cost burden, I. Phillips Curve specification, Inflation, Natural disasters, Northern Europe

International Monetary Fund. Kingdom of the Netherlands–the Netherlands: Selected Issues (IMF Staff Country Reports 2023, 107).