The awakening of inflation and the return of the Phillips curve in the euro area

2026

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This paper analyzes the recent surge in euro area inflation and its connection to the Phillips curve, offering insights into monetary policy effectiveness.

* Examines the increased frequency of price adjustments by euro area firms during the 2021-22 inflation surge.
* Investigates how this shift in price-setting behavior has affected the slope of the Phillips curve and monetary policy transmission.
* Presents empirical evidence using panel local projections to support the model's predictions on state-dependent monetary policy.

Tags: inflation, Phillips curve, euro area, monetary policy, price setting

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