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Disinflation in Spain: The Recent Experience

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  • Mr. Nicolas Sobczak

Abstract

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.

Suggested Citation

  • Mr. Nicolas Sobczak, 1998. "Disinflation in Spain: The Recent Experience," IMF Working Papers 1998/106, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1998/106
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    References listed on IDEAS

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    1. Bleaney, Michael & Mizen, Paul, 1997. "Credibility and Disinflation in the European Monetary System," Economic Journal, Royal Economic Society, vol. 107(445), pages 1751-1767, November.
    2. Francesco Giavazzi & Marco Pagano, 1991. "The Advantage of Tying One's Hands: EMS Discipline and Central Bank Credibility," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 303-330, National Bureau of Economic Research, Inc.
    3. Juan Dolado, 1999. "A Cost-Benefit Analysis of Going from Low Inflation to Price Stability in Spain," NBER Chapters, in: The Costs and Benefits of Price Stability, pages 95-132, National Bureau of Economic Research, Inc.
    4. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters, in: Monetary Policy, pages 155-193, National Bureau of Economic Research, Inc.
    5. Andreas Fischer, 1996. "Central bank independence and sacrifice ratios," Open Economies Review, Springer, vol. 7(1), pages 5-18, January.
    6. Laurence Ball & N. Gregory Mankiw, 1995. "Relative-Price Changes as Aggregate Supply Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 161-193.
    7. Stanley Fischer, 1981. "Relative Shocks, Relative Price Variability, and Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(2), pages 381-442.
    8. Ana Revenga, 1993. "Credibility and Inflation Persistence in the European Monetary System," Working Papers 9321, Banco de España.
    9. Guy Debelle, 1996. "The Ends of Three Small Inflations: Australia, New Zealand and Canada," Canadian Public Policy, University of Toronto Press, vol. 22(1), pages 56-78, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Argandoña, Antonio, 1998. "Evolución de la "cultura de la estabilidad" en España, La," IESE Research Papers D/375, IESE Business School.
    2. Ricardo D. Brito, 2010. "Inflation Targeting Does Not Matter: Another Look at OECD Sacrifice Ratios," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1679-1688, December.
    3. Diego Mendez-Carbajo & Dimitrios Thomakos, 2003. "Economic integration, market discipline and productivity growth in Spain," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(4), pages 359-375.
    4. María Ángeles Caraballo & Carlos Usabiaga, 2003. "Análisis de la estructura de la inflación de las regiones españolas: La metodología de Ball y Mankiw," Economic Working Papers at Centro de Estudios Andaluces E2003/44, Centro de Estudios Andaluces.
    5. Constantina Kottaridi & Mendez-Carbajo Diego & D. Thomakos Dimitrios, 2009. "Inflation Dynamics and the Cross-Sectional Distribution of Prices in the E.U. Periphery," Springer Books, in: Takashi Kamihigashi & Laixun Zhao (ed.), International Trade and Economic Dynamics, pages 449-475, Springer.
    6. Rodríguez López, Mª A., 2002. "Crisis de credibilidad de la peseta en las bandas del SME. Una aplicación del Modelo de Markov con saltos de régimen," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 20, pages 599-626, Diciembre.
    7. Carlos Usabiaga & María à ngeles Caraballo, 2004. "Inflation and Nominal Rigidities in Spanish Regions: The Ball and Mankiw Approach," ERSA conference papers ersa04p12, European Regional Science Association.
    8. Vratislav Izak, 2001. "External Factors in Czech Disinflation (Dynamic Analysis)," Archive of Monetary Policy Division Working Papers 2001/35, Czech National Bank.
    9. repec:rim:rimwps:43-07 is not listed on IDEAS

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