Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/319705 
Year of Publication: 
2025
Series/Report no.: 
BoF Economics Review No. 1/2025
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We study recent inflation and labour market dynamics in the euro area within a general equilibrium framework. Rapid inflation was mainly caused by demand and supply shocks, but labor market-specific shocks also contributed to the surge in inflation. Our results underscore the significance of import price shocks in explaining the recent interactions between wages and prices. The observed exceptional labour market tightness has also been influenced by a decline in hours worked per person, alongside more commonly studied demand and supply shocks.
Subjects: 
euro area
labour market shocks
inflation
labour market tightness
JEL: 
E31
E32
E37
F41
Persistent Identifier of the first edition: 
Document Type: 
Research Report

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