Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/331094 
Authors: 
Year of Publication: 
2023
Citation: 
[Journal:] Research in Globalization [ISSN:] 2590-051X [Volume:] 7 [Article No.:] 100159 [Year:] 2023 [Pages:] 1-25
Publisher: 
Elsevier, Amsterdam
Abstract: 
This paper introduces a new decomposition of euro area headline inflation into core, cyclical, and residual components. Our new core inflation measure, the structural core inflation rate, is the expected headline inflation, conditional to medium to long-term demand and supply-side developments. It shows smoothness and trending properties, economic content, and forecasting ability for headline inflation and other available core inflation measures routinely used at the ECB for internal or external communication. Hence, it carries additional helpful information for policy-making decisions. Concerning recent developments, all the inflation components contributed to its post-pandemic upsurge. Since mid-2021, core inflation has been downward, landing at about 3% in 2022. Cyclical and residual inflation-associated with idiosyncratic supply chains, energy markets, and geopolitical tensions- are currently the major threats to price stability. While some cyclical stabilization is ongoing, a stagflation scenario cum weakening overall financial conditions might emerge. A pressing issue for ECB monetary policy will be to face -mostly supply-side- inflationary pressure without triggering a financial crisis.
Subjects: 
Core inflation
COVID-19 pandemic
Dot-com bubble
ECB monetary policy
Euro area
Headline inflation
Russia's war in Ukraine
Sovereign debt crisis
Subprime financial crisis
Trend-cycle decomposition
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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