Disinflation in Spain

Download or read book Disinflation in Spain written by Mr.Nicolas Sobczak and published by International Monetary Fund. This book was released on 1998-08-01 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the causes of the recent disinflation in Spain. A standard Phillips curve model is used to disentangle the contributions of three possible shocks: an adverse demand shock that raises unemployment, a positive supply shock resulting from relative price adjustments or structural improvements in the labor market, and a credibility shock that lowers inflationary expectations. The main element underlying Spain’s recent disinflation appears to be a fall in inflation expectations, thanks to the country’s commitment to participate in Economic and Monetary Union from the start, and policy actions geared to that end.