Disinflation in Spain: The Recent Experience

Author/Editor:

Nicolas Sobczak

Publication Date:

August 1, 1998

Electronic Access:

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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 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.

Series:

Working Paper No. 1998/106

Subject:

Disinflation Inflation Labor Output gap Prices Production Real wages Wage bargaining

English

Publication Date:

August 1, 1998

ISBN/ISSN:

9781451852868/1018-5941

Stock No:

WPIEA1061998

Pages:

30

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