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The impact of import prices on inflation in the euro area

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  • N. Chatelais
  • K. Schmidt

Abstract

We study low consumer price inflation in the euro area between 2013 and the third quarter of 2016, before its recent increase due to higher energy prices. Two main factors identified in Rue de la Banque No. 6 have continued to contribute roughly equally to low headline inflation up to 2015: imported inflation and domestic slack (output gap). Since 2015, the downward pressure from lower import prices has increased while that from domestic slack has eased noticeably. Focusing on consumer prices of manufactured goods, we find that the pass-through of import prices of manufactured goods is almost complete after a period of six quarters. Import prices of manufactured goods explain a significant part of the 2013-2015 weakness and the subsequent recovery of manufactured goods consumer price inflation.

Suggested Citation

  • N. Chatelais & K. Schmidt, 2017. "The impact of import prices on inflation in the euro area," Rue de la Banque, Banque de France, issue 37, january..
    • Handle: RePEc:bfr:rueban:2017:37
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    References listed on IDEAS

    as
    1. Ahn JaeBin & Park Chang-Gui & Park Chanho, 2017. "Pass-through of imported input prices to domestic producer prices: evidence from sector-level data," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(2), pages 1-14, June.
    2. Hahn, Elke, 2003. "Pass-through of external shocks to euro area inflation," Working Paper Series 243, European Central Bank.
    3. Jonathan McCarthy, 2007. "Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Economies," Eastern Economic Journal, Eastern Economic Association, vol. 33(4), pages 511-537, Fall.
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    Cited by:

    1. Sophie Guilloux-Nefussi, 2017. "Globalisation and industry concentration: What are the consequences for inflation dynamics?," Rue de la Banque, Banque de France, issue 45, june..
    2. S. Béreau & V. Faubert & K. Schmidt, 2018. "Explaining and Forecasting Euro Area Inflation: the Role of Domestic and Global Factors," Working papers 663, Banque de France.
    3. Clémence Berson & Louis de Charsonville & Pavel Diev & Violaine Faubert & Laurent Ferrara & Sophie Guilloux-Nefussi & Yannick Kalantzis & Antoine Lalliard & Julien Matheron & Matteo Mogliani, 2018. "Does the Phillips curve still exist?," Rue de la Banque, Banque de France, issue 56, february.

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