{"title":"Core strength: international evidence on the impact of energy prices on core inflation","authors":"Gertjan Vlieghe","doi":"10.1111/ecca.12565","DOIUrl":null,"url":null,"abstract":"<p>In the post-pandemic period, there was substantial cross-country heterogeneity in energy prices faced by consumers, due to variation in countries' energy mixes, as well as variation in government energy subsidy policies. The main contribution of this paper is to exploit this country-level variation to show that countries with higher domestic energy prices faced higher subsequent core inflation. Core inflation rises gradually after an energy shock, for a little over a year, before falling back to the pre-shock rate of inflation. We argue that in the aftermath of large energy price shocks, core inflation is not a reliable measure of underlying or persistent inflation, and should be adjusted for the predicted, country-specific, energy cost pass-through. Focusing more narrowly on services inflation rather than core inflation does not solve the problem, as services inflation responds similarly, in both magnitude and duration, to energy price shocks.</p>","PeriodicalId":48040,"journal":{"name":"Economica","volume":"92 366","pages":"406-419"},"PeriodicalIF":1.6000,"publicationDate":"2025-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economica","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/ecca.12565","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
In the post-pandemic period, there was substantial cross-country heterogeneity in energy prices faced by consumers, due to variation in countries' energy mixes, as well as variation in government energy subsidy policies. The main contribution of this paper is to exploit this country-level variation to show that countries with higher domestic energy prices faced higher subsequent core inflation. Core inflation rises gradually after an energy shock, for a little over a year, before falling back to the pre-shock rate of inflation. We argue that in the aftermath of large energy price shocks, core inflation is not a reliable measure of underlying or persistent inflation, and should be adjusted for the predicted, country-specific, energy cost pass-through. Focusing more narrowly on services inflation rather than core inflation does not solve the problem, as services inflation responds similarly, in both magnitude and duration, to energy price shocks.
期刊介绍:
Economica is an international journal devoted to research in all branches of economics. Theoretical and empirical articles are welcome from all parts of the international research community. Economica is a leading economics journal, appearing high in the published citation rankings. In addition to the main papers which make up each issue, there is an extensive review section, covering a wide range of recently published titles at all levels.