IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v72y2025icp103-110.html
   My bibliography  Save this article

The rise and fall of inflation in the Euro Area (2021-2024): A heterodox perspective

Author

Listed:
  • Ferreira, Vicente
  • Abreu, Alexandre
  • Louçã, Francisco

Abstract

Over the period of 2021–2024, inflation has resurged and then retreated in most industrialized countries. Economists were divided into two main camps: team transitory, which argued that inflationary pressures were primarily cost-push and would tend to fade away as supply disruptions eased, and team permanent, which viewed it as a predominantly demand-pull process and warned about the risks of persistent second-round effects associated with an overheated labor market. This paper covers this theoretical debate on the origins of inflation and contrasts it to the available empirical evidence for the Euro Area, laying out several inconsistencies in the New Keynesian argument proposed by team permanent. Since that was, nevertheless, the predominant interpretation among central bankers, including the ECB, this paper also discusses the impacts of monetary policy decisions informed by the New Keynesian view, arguing that there is good reason to believe that it has had regressive consequences in terms of the functional distribution of income as well as differentiated impacts across Euro Area core and periphery countries.

Suggested Citation

  • Ferreira, Vicente & Abreu, Alexandre & Louçã, Francisco, 2025. "The rise and fall of inflation in the Euro Area (2021-2024): A heterodox perspective," Structural Change and Economic Dynamics, Elsevier, vol. 72(C), pages 103-110.
    • Handle: RePEc:eee:streco:v:72:y:2025:i:c:p:103-110
    DOI: 10.1016/j.strueco.2024.12.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X24001802
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2024.12.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Isabella M Weber & Jesus Lara Jauregui & Lucas Teixeira & Luiza Nassif Pires, 2024. "Inflation in times of overlapping emergencies: Systemically significant prices from an input–output perspective," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(2), pages 297-341.
    2. Ben Bernanke & Olivier Blanchard, 2025. "What Caused the US Pandemic-Era Inflation?," American Economic Journal: Macroeconomics, American Economic Association, vol. 17(3), pages 1-35, July.
    3. Francisco Louçã, 2021. "As time went by - why is the long wave so long?," Journal of Evolutionary Economics, Springer, vol. 31(3), pages 749-771, July.
    4. James K. Galbraith, 1997. "Time to Ditch the NAIRU," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 93-108, Winter.
    5. Freeman, Chris & Louca, Francisco, 2002. "As Time Goes By: From the Industrial Revolutions to the Information Revolution," OUP Catalogue, Oxford University Press, number 9780199251056, Decembrie.
    6. Sylvio Kappes, 2022. "Monetary policy and personal income distribution: a survey of the empirical literature," Chapters, in: Sylvio Kappes & Louis-Philippe Rochon & Guillaume Vallet (ed.), The Future of Central Banking, chapter 2, pages 38-61, Edward Elgar Publishing.
    7. Servaas Storm, 2023. "Profit inflation is real," PSL Quarterly Review, Economia civile, vol. 76(306), pages 243-259.
    8. Mark Setterfield, 2023. "Inflation and distribution during the post-COVID recovery: a Kaleckian approach," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 46(4), pages 587-611, October.
    9. Joseph E Stiglitz & Ira Regmi, 2023. "The causes of and responses to today’s inflation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 32(2), pages 336-385.
    10. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    11. Jalal Qanas & Malcolm Sawyer, 2024. "‘Independence’ of Central Banks and the Political Economy of Monetary Policy," Review of Political Economy, Taylor & Francis Journals, vol. 36(2), pages 565-580, April.
    12. Reis, Ricardo, 2023. "What can keep euro area inflation high?," CEPR Discussion Papers 18375, C.E.P.R. Discussion Papers.
    13. Chikako Baba & Mr. Romain A Duval & Ting Lan & Petia Topalova, 2023. "The 2020-2022 Inflation Surge Across Europe: A Phillips-Curve-Based Dissection," IMF Working Papers 2023/030, International Monetary Fund.
    14. Alex Domash & Lawrence H. Summers, 2022. "How Tight are U.S. Labor Markets?," NBER Working Papers 29739, National Bureau of Economic Research, Inc.
    15. Maurizio Franzini & Mario Pianta, 2016. "The Engines of Inequality," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 51(2), pages 49-55, March.
    16. Arce, Óscar & Ciccarelli, Matteo & Montes-Galdón, Carlos & Kornprobst, Antoine, 2024. "What caused the euro area post-pandemic inflation?," Occasional Paper Series 343, European Central Bank.
    17. Olivier J. Blanchard & Ben S. Bernanke, 2024. "An Analysis of Pandemic-Era Inflation in 11 Economies," NBER Working Papers 32532, National Bureau of Economic Research, Inc.
    18. Francisco Louçã & Alexandre Abreu & Gonçalo Pessa Costa, 2021. "Disarray at the headquarters: Economists and Central bankers tested by the subprime and the COVID recessions [Forward guidance without common knowledge]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 30(2), pages 273-296.
    19. Louis-Philippe Rochon & Mario Seccareccia, 2023. "A primer on monetary policy and its effect on income distribution: a heterodox perspective," Chapters, in: Sylvio Kappes & Louis-Philippe Rochon & Guillaume Vallet (ed.), Central Banking, Monetary Policy and Income Distribution, chapter 1, pages 20-34, Edward Elgar Publishing.
    20. Thomas Ferguson & Servaas Storm, 2023. "Myth and Reality in the Great Inflation Debate: Supply Shocks and Wealth Effects in a Multipolar World Economy," Working Papers Series inetwp196, Institute for New Economic Thinking.
    21. Botta, Alberto & Caverzasi, Eugenio & Russo, Alberto, 2024. "Same old song: On the macroeconomic and distributional effects of leaving a Low Interest Rate Environment," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 552-570.
    22. Ricardo Summa & Julia Braga, 2020. "Two routes back to the old Phillips curve: the amended mainstream model and the conflict augmented alternative," Bulletin of Political Economy, Bulletin of Political Economy, vol. 14(1), pages 81-115, June.
    23. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Bernhard Schütz, 2020. "Structural change in times of increasing openness: assessing path dependency in European economic integration," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1467-1495, November.
    24. Robert C. M. Beyer & Ms. Ruo Chen & Florian Misch & Claire Li & Ezgi O. Ozturk & Mr. Lev Ratnovski, 2024. "Monetary Policy Pass-Through to Interest Rates: Stylized Facts from 30 European Countries," IMF Working Papers 2024/009, International Monetary Fund.
    25. Tzamourani, Panagiota, 2021. "The interest rate exposure of euro area households," European Economic Review, Elsevier, vol. 132(C).
    26. Giuseppe Celi & Dario Guarascio & Jelena Reljic & Annamaria Simonazzi & Francesco Zezza, 2022. "The Asymmetric Impact of War: Resilience, Vulnerability and Implications for EU Policy," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(3), pages 141-147, May.
    27. Marc Lavoie, 2024. "Conflictual Inflation and the Phillips Curve," Review of Political Economy, Taylor & Francis Journals, vol. 36(4), pages 1397-1419, October.
    28. Guschanski, Alexander & Onaran, Özlem, 2021. "The decline in the wage share: falling bargaining power of labour or technological progress? Industry-level evidence from the OECD," Greenwich Papers in Political Economy 29007, University of Greenwich, Greenwich Political Economy Research Centre.
    29. Axelle Arquié & Malte Thie, 2023. "Energy, Inflation and Market Power: Excess Pass-Through in France," Working Papers 2023-16, CEPII research center.
    30. Servaas Storm, 2024. "Tilting at Windmills: Bernanke and Blanchard's Obsession with the Wage-Price Spiral," Working Papers Series inetwp220, Institute for New Economic Thinking.
    31. Nathan Perry & Nathaniel Cline, 2016. "What caused the great inflation moderation in the US? A post-Keynesian view," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(4), pages 475-502, October.
    32. Eckhard Hein, 2024. "Inflation is always and everywhere … a conflict phenomenon: post-Keynesian inflation theory and energy price driven conflict inflation, distribution, demand and employment," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 21(2), pages 202-231, April.
    33. Bańbura, Marta & Bobeica, Elena & Martínez Hernández, Catalina, 2023. "What drives core inflation? The role of supply shocks," Working Paper Series 2875, European Central Bank.
    34. Matías Vernengo & Esteban Pérez Caldentey, 2023. "Price and prejudice: reflections on the return of inflation and ideology* , *," Review of Keynesian Economics, Edward Elgar Publishing, vol. 11(2), pages 129-146, April.
    35. Battistini, Niccolò & Di Nino, Virginia & Gareis, Johannes, 2023. "The consumption impulse from pandemic savings ‒ does the composition matter?," Economic Bulletin Boxes, European Central Bank, vol. 4.
    36. Maarten Keune, 2015. "The effects of the EU’s assault on collective bargaining: less governance capacity and more inequality," Transfer: European Review of Labour and Research, , vol. 21(4), pages 477-483, November.
    37. Servaas Storm, 2024. "Tilting at Windmills: Bernanke and Blanchard’s Obsession with the Wage-Price Spiral," International Journal of Political Economy, Taylor & Francis Journals, vol. 53(2), pages 126-148, April.
    38. Axelle Arquie & Malte Thie, 2023. "Energy, Inflation and Market Power: Excess Pass-Through in France," IMK Working Paper 220-2023, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    39. Isabella M. Webe & Evan Wasner, 2023. "Sellers’ inflation, profits and conflict: why can large firms hike prices in an emergency?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 11(2), pages 183-213, April.
    40. Thomas Ferguson & Servaas Storm, 2023. "Myth and Reality in the Great Inflation Debate: Supply Shocks and Wealth Effects in a Multipolar World Economy," International Journal of Political Economy, Taylor & Francis Journals, vol. 52(1), pages 1-44, January.
    41. Guillermo Matamoros, 2024. "Are Firm Markups Boosting Inflation? A Post-Keynesian Institutionalist Approach to Markup Inflation in Select Industrialized Countries," Review of Political Economy, Taylor & Francis Journals, vol. 36(3), pages 1042-1063, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vicente Ferreira & Joao Pedro Ferreira & Dario Guarascio & Francesco Zezza, 2024. "Shockflation in the EU: sectoral shocks, cost-push inflation and structural asymmetries in core and periphery countries," LEM Papers Series 2024/31, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Leonardo Ciambezi & Mattia Guerini & Mauro Napoletano & Andrea Roventini, 2023. "Accounting for the Multiple Sources of Inflation: an Agent-Based Model Investigation," GREDEG Working Papers 2023-14, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France, revised Jun 2024.
    3. Uxó, Jorge & Febrero, Eladio & Álvarez, Ignacio, 2025. "Prices, markups and wages: inflation and its distributive consequences in Spain, 2021-2023," Structural Change and Economic Dynamics, Elsevier, vol. 72(C), pages 179-192.
    4. Giovanni Dosi & Lucrezia Fanti & Maria Enrica Virgillito, 2024. "Attributes and Trends of Rentified Capitalism," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(2), pages 435-457, July.
    5. Montes Rojas Gabriel & Dvoskin Ariel & Feldman Germán, 2023. "Exchange-Rate Regime And Sectorial Profitability In A Small Open Economy: A Theoretical And Empirical Analysis Of Argentina (2016-2023)," Asociación Argentina de Economía Política: Working Papers 4673, Asociación Argentina de Economía Política.
    6. Pianta, Mario, 2023. "Inflation and distributive conflicts," MPRA Paper 119345, University Library of Munich, Germany.
    7. Hein, Eckhard, 2023. "Inflation is always and everywhere … a conflict phenomenon: Post-Keynesian inflation theory and energy price driven conflict inflation," IPE Working Papers 224/2023, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    8. Alessandri, Piergiorgio & Gazzani, Andrea, 2025. "Natural gas and the macroeconomy: Not all energy shocks are alike," Journal of Monetary Economics, Elsevier, vol. 151(C).
    9. Jo Michell, 2023. "Macroeconomic policy at the end of the age of abundance," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 20(2), pages 369-387, November.
    10. Andrew M. Fischer & Servaas Storm, 2023. "The Return of Debt Crisis in Developing Countries: Shifting or Maintaining Dominant Development Paradigms?," Development and Change, International Institute of Social Studies, vol. 54(5), pages 954-993, September.
    11. Isik, Sayim & Mert, Mehmet & Ulug, Mehmet, 2025. "Profit produced by post-pandemic inflation: Evidence from an emerging economy," Structural Change and Economic Dynamics, Elsevier, vol. 72(C), pages 233-244.
    12. Adolfsen, Jakob Feveile & Ferrari Minesso, Massimo & Mork, Jente Esther & Van Robays, Ine, 2024. "Gas price shocks and euro area inflation," Journal of International Money and Finance, Elsevier, vol. 149(C).
    13. Dabrowski, Cara, 2025. "A Kaleckian approach to the financialization-distribution-inflation nexus: Germany and Austria in comparative perspective," IPE Working Papers 250/2025, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    14. Bozani, Vasiliki & Drydakis, Nick, 2011. "Studying the NAIRU and its Implications," IZA Discussion Papers 6079, Institute of Labor Economics (IZA).
    15. Nieto-Carrillo, Ernesto & Carreira, Carlos & Teixeira, Paulino, 2024. "Industrial dynamics in the ICT technological paradigm: The case of Portugal, 1986–2018," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 155-170.
    16. Waltraud Schelkle & Anke Hassel, 2012. "The Policy Consensus Ruling European Political Economy: The Political Attractions of Discredited Economics," Global Policy, London School of Economics and Political Science, vol. 3, pages 16-27, December.
    17. Davide Romaniello & Antonella Stirati, 2024. "Cost-push and conflict inflation in theory and practice - with a discussion of the Italian case," FMM Working Paper 96-2024, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    18. Lin, Xiang & Li, Xiaoying, 2025. "A study on anchoring Swedish inflation expectations in times of turbulence," Energy Economics, Elsevier, vol. 144(C).
    19. Esteban Pérez Caldentey & Matías Vernengo, 2013. "Is inflation targeting operative in an open economy setting?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(3), pages 347-369, January.
    20. Etienne de L'Estoile & Mathilde Salin, 2024. "Who Takes the Land? Quantifying the Use of Built-Up Land by French Economic Sectors to Assess Their Vulnerability to the No Net Land Take Policy," Working papers 941, Banque de France.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:streco:v:72:y:2025:i:c:p:103-110. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/525148 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.