IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Why has Core Inflation Remained so Muted in the Face of the Oil Shock?

  • Paul van den Noord
  • Christophe André

To help policymakers form a judgment on inflation risks and the required monetary policy stance the OECD has developed an analytical framework based on a set of 'eclectic' Phillips curves estimated for the two largest OECD economies, the United States and the euro area, which is presented in this paper. This framework is used in the preparation of the Economic Outlook to explain recent developments in core inflation, excluding food and energy, based on developments in measures of economic slack (the output gap), spill-over effects from energy prices onto core inflation and lagged responses to past inflation via expectations formation. The fact that the knock-on effects from energy shocks onto core inflation appear small in comparison with the 1970s can be explained by the secular fall in energy intensity, a low and stable rate of 'mean inflation' -- to which observed inflation reverts after a shock has worked its way through -- and persistent slack in the aftermath of the bursting of the dotcom bubble. Pourquoi l?inflation sous-jacente est elle restée si modérée en dépit du choc pétrolier ? Afin d'aider les décideurs politiques à apprécier les risques inflationnistes et l'orientation requise pour la politique monétaire, l'OCDE a développé un cadre analytique fondé sur un ensemble de courbes de Phillips 'éclectiques' estimées pour les deux plus grandes économies de l'OCDE, les États-unis et la zone euro, qui est présenté dans ce document. Ce cadre est utilisé dans la préparation des Perspectives économiques pour expliquer l'évolution récente de l'inflation sous-jacente, hors alimentation et énergie, en fonction de l'évolution de mesures de la robustesse de la conjoncture (l'écart de production), des effets de contagion des prix de l'énergie sur l'inflation sous-jacente et des réponses différées à l'inflation passée à travers la formation des anticipations. Le fait que les effets d'entraînement des prix de l'énergie sur l'inflation sous-jacente apparaissent faibles comparés aux années 1970 peut s'expliquer par la baisse séculaire de l'intensité énergétique, un taux d'inflation 'moyen' faible et stable -- vers lequel l'inflation observée converge une fois qu'un choc a été absorbé -- et par une faiblesse persistante de l'économie à la suite de l'éclatement de la bulle 'dotcom'.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://dx.doi.org/10.1787/206408110285
Our checks indicate that this address may not be valid because: 403 Forbidden (http://dx.doi.org/10.1787/206408110285 [303 See Other]--> http://www.oecd-ilibrary.org/economics/why-has-core-inflation-remained-so-muted-in-the-face-of-the-oil-shock_206408110285). If this is indeed the case, please notify ()


Download Restriction: no

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 551.

as
in new window

Length:
Date of creation: 23 Apr 2007
Date of revision:
Handle: RePEc:oec:ecoaaa:551-en
Contact details of provider: Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
Phone: 33-(0)-1-45 24 82 00
Fax: 33-(0)-1-45 24 85 00
Web page: http://www.oecd.org
Email:


More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:551-en. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.