0.4 percentage points (headline), 0.7 percentage points (core) since the onset of the pandemic.
This is the 3-month annualized headline inflation rate.
figure 1: Three-month annualized inflation rates for US CPI (black), US HICP (grey), and Eurozone HICP (turquoise). Eurozone and U.S. HICPs were seasonally adjusted by the authors using geometric X-12 before using log-differences to calculate inflation rates. Recession dates as defined by NBER are shaded from peak to trough in gray. Source: BLS, Eurostat, NBER and author’s calculations.
Relative to the US, inflation in the euro area has picked up recently (3-month change). One can attribute this to the fact that Europe has experienced sharp fluctuations in energy prices, especially gas prices, compared to the United States.
To assess domestic factors—especially demand-pull versus aggregate supply—the propositions that are more important in the United States, one can look at core indicators (Jason Furman argues that inflation is more driven by demand pull). These numbers are shown in Figure 2.
figure 2: Three-month annualized inflation rates for US core CPI (black), Eurozone core HICP (turquoise). The authors seasonally adjusted the euro area using geometric X-12 before using the log difference to calculate the inflation rate. Recession dates as defined by NBER are shaded from peak to trough in gray. Source: BLS, Eurostat, NBER and author’s calculations.
Headline and core inflation in the U.S. is higher than in the corresponding euro area series. Is the difference statistically significant?Recall that measures in the United States differ from those in the euro area (see this HICP), it is interesting to compare the differences between the US and Eurozone series before and after the pandemic (and the implementation of different fiscal and monetary measures).
Specifically, I check the time the difference inside the difference Between inflation in the U.S. and the euro area, the period from before to after.this is an app difference method.
Define the annualized monthly/monthly inflation difference between the US and country i:
Take this variable and run the following regression during 2018-2022M03:
Where coronavirus diseaseTon is a dummy variable that takes the value 1 from 2020M02.
The alpha coefficient is the pre-pandemic inflation differential between the US and country i; the beta coefficient is the change in the post-pandemic inflation differential.
Using the HAC robust standard error, I found that for headline inflation, the estimated beta coefficient for the US-Euro area is 0.0042 (HAC robust standard error 0.011). For core inflation, the estimated beta coefficient for the US-Euro area is 0.0071 (HAC robust standard error of 0.011). In either case, the t-statistic with a beta coefficient of zero does not approach the usual level of statistical significance.
this ECB Some reasons (mechanically) for differences in inflation behavior are discussed.
So while it is true that headline (core) inflation in the US accelerated by 0.4 percentage points (0.7 percentage points) over the euro area, the difference is not statistically significant.
