Inflation Inequality in Europe

Arbeitspapier

We analyze cross-household inflation dispersion in Europe using “fictitious” monthly inflation rates for several household categories (grouped according to income levels, household size, socio-economic status, age) for the period from 1997 to 2008. Our analysis is carried out on a panel of 23 up to 27 household-specific inflation rates per country for 15 countries. In the first part of the paper, we employ time series and related non-stationary panel approaches to shed light on cross-country differences in inflation inequality with respect to the number of driving forces in the panel. In particular, we focus on the degree of persistence of the household-specific inflation rates and their the adjustment behaviour towards the inflation rate of a “representative household”. In the second part of the paper, we pool over the full sample of all countries and test if and by how much certain household categories across Europe are more prone to significant inflation differentials and significant differences in the volatility of inflation. Furthermore we search for the presence of clusters with respect to inflation susceptibility. On the national level, we find evidence for the existence of one main driving factor driving the non-stationarity of the panel and evidence for a single co-integration vector. Persistence of deviations, however, is high, and the adjustment speed towards the “representative household” is low. Even if there is no concern about a long-run stable distribution, at least in the short- to medium run deviations tend to last. On the European level, we find small but significant differences (mainly along income levels), we can separate 5 clusters and two main driving forces for the differences in the overall panel. All in all, even if differences are relatively small, they are not negligible and persistent enough to represent a serious matter of debate for economic and social policy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DEP (Socioeconomics) Discussion Papers - Macroeconomics and Finance Series ; No. 2/2011

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
• Subject: Inflation ; Inequality ; Heterogeneity ; Time Series ; Panel

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Colavecchio, Roberta ; Fritsche, Ulrich ; Graff, Michael
• Event: Veröffentlichung
• (who): Hamburg University, Department Economics and Politics
• (where): Hamburg
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/103193
• Last update: 10.03.2025, 11:45 AM CET