Inflation differences

In the euro area, differences in the course of the Harmonized Index of Consumer Prices (HICP) in individual countries. – These are mainly attributable to the different weight of individual goods, such as petroleum products and the share of owner-occupied housing: petroleum products; share of owner-occupied housing – in the baskets of goods of the individual countries, – differences in taxation – especially sales tax – and regulation – for example, in the telecommunications sector, and – a growth factor which causes participants below the general prosperity level of the EU to achieve strong productivity advances in a catching-up process The differences are, however, generally associated with noticeable price increases as a result of wage increases. This is because wage increases also affect the non-tradable goods sector, without corresponding productivity improvements there: Balassa-Samuelson effect. – In a currency area, a country with below-average inflation rates due to weak demand becomes more competitive compared with other countries. Over time, this boosts demand in that country and reduces it in others, thereby automatically bringing about a rebalancing. – Statistically, inflation differentials in the euro area are of roughly the same order of magnitude as in the individual U.S. states. – See devaluation, fiscal, blackmail potential, headline inflation, inflation, core inflation, home ownership, purchasing managers’ survey, survey of professional forecasters, EMU blast, real interest rate argument, structural reforms, inflationary pressures, sectoral, exchange rate effect, real. – Cf. ECB Monthly Bulletin of July 2001, pp. 23 ff., ECB Monthly Bulletin of April 2003, pp. 29 ff, ECB Annual Report 2003, pp. 46 ff (detailed explanation), ECB Monthly Report of May 2005, pp. 65 ff (in-depth discussion), ECB Monthly Report of July 2005, p. 66 (problem of different baskets of goods), Deutsche Bundesbank Monthly Report of June 2006, pp. 35 ff (differences explained; some language unattractive), Deutsche Bundesbank Monthly Report of December 2008, pp. 38 ff. (change in price competitiveness within EMU states since 1999), ECB Monthly Report of January 2009, p. 41 ff (higher inflation rate for services versus goods explained; overviews), ECB Annual Report 2008, p. 93 ff (different competitiveness of individual EU member states; overviews), ECB Annual Report 2011, p. 77 (inflation rate since 2008 of EU member states compared).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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