We are grateful to two anonymous referees and the editor for very helpful comments and suggestions on a previous draft. We also thank participants to the BBVA Economic Research Department Seminar Series, the XIIIth Applied Economics Meetings, Seville, June 2010, and the XXXVth Spanish Economic Association Annual Conference, Madrid, December 2010, for useful remarks. The usual disclaimer applies.
Product Market Competition, Monetary Policy Regimes and Inflation Dynamics: Evidence from a Panel of OECD Countries†
Article first published online: 19 MAY 2013
© 2013 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd.
Oxford Bulletin of Economics and Statistics
Volume 76, Issue 4, pages 484–509, August 2014
How to Cite
Correa-López, M., García-Serrador, A. and Mingorance-Arnáiz, C. (2014), Product Market Competition, Monetary Policy Regimes and Inflation Dynamics: Evidence from a Panel of OECD Countries. Oxford Bulletin of Economics and Statistics, 76: 484–509. doi: 10.1111/obes.12031
- Issue published online: 3 JUL 2014
- Article first published online: 19 MAY 2013
- Manuscript Received: MAR 2012
We empirically analyze the impact of product market competition on the responsiveness of inflation to macroeconomic imbalances. If competition is high the response of inflation to lagged inflation, unemployment and import prices is reduced, while inflation is more responsive to changes in productivity growth in countries in which competition is above the OECD average. Given the (‘good luck’) macroeconomic trajectories of the 1990s–2000s, the structural reforms that made goods markets more competitive improved the ability of OECD economies to smooth (dis)inflationary shocks, while changes in the monetary policy framework had a modest role in taming inflation during the Great Moderation.