Heterogeneity of inflation in the euro area: more complicated than it seems

Christophe Blot (1) , Jérôme Creel (1) , François Geerolf (1) , Sandrine Levasseur (1)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

We document different measures of inflation heterogeneity in the euro area. We ask what mostly drives this heterogeneity and whether there is cause for concern. Heterogeneity in headline inflation has increased substantially, and way more than heterogeneity in core inflation. We argue that core inflation dispersion is largely driven by small countries, where inflation reversion is the most likely. We then discuss about monetary policy as a limiting or aggravating factor of inflation heterogeneity.

Domaines: Économie et finance quantitative [q-fin]

Christophe Blot, Jérôme Creel, François Geerolf, Sandrine Levasseur. Heterogeneity of inflation in the euro area: more complicated than it seems. Monetary Dialogue Papers, 2022, pp.1-31. ⟨10.2861/737138⟩. ⟨hal-03970416⟩