Working Paper: CEPR ID: DP10010
Authors: Stefan Gerlach; Reamonn Lydon; Rebecca Stuart
Abstract: We study the determination of Irish inflation between 1935 and 2012 using a Phillips curve approach. We find that a simple backward-looking Phillips Curve that incorporates import prices is stable over the sample period and passes a number of diagnostic tests. We also consider the importance of UK and euro area inflation for Irish inflation. While UK inflation is significant in the period 1935 ? 1979, and euro area inflation is significant in the period 1980 ? 2012, we present evidence that suggests that these findings reflect common shocks.
Keywords: historical statistics; import prices; inflation; ireland; output gap
JEL Codes: E3; E4; N14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Irish inflation (E31) | backward-looking Phillips curve model (E31) |
| lagged inflation (E31) | Irish inflation (E31) |
| output gap (E23) | Irish inflation (E31) |
| rate of change of import prices (F14) | Irish inflation (E31) |
| UK inflation (E31) | Irish inflation (E31) |
| euro area inflation (E31) | Irish inflation (E31) |
| common shocks (E32) | UK inflation and Irish inflation correlation (E31) |
| common shocks (E32) | euro area inflation and Irish inflation correlation (E31) |