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Title:Price dispersion in the Euro Area : the case of a symmetric oil price shock PDF Logo
Authors:Carstensen, Kai
Hülsewig, Oliver
Wollmershäuser, Timo
Issue Date:2009
Series/Report no.:CESifo working paper 2718
Abstract:This paper studies the causes of price dispersion in the euro area emerging in response to a shock that hits all member countries symmetrically. We use a panel VAR model which is estimated over the period 1996 - 2007 to generate impulse responses of a range of price and wage variables to an oil price shock. We split our sample of countries into two disjoint groups according to the impact of the oil price shock on the overall price level. While crosscountry heterogeneity in the shortrun passthrough can be attributed to different weights of energy items in the consumption basket, heterogeneity in the mediumrun response of consumer prices is mainly due to a different response of wages and salaries in the industry sector, which can be attributed to different degrees of price and wage rigidities in the member countries.
Subjects:pass-through
oil price shock
euro area inflation
heterogeneity
panel VAR model
JEL:C32
C33
E31
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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