INFLATION MOVEMENTS IN THE EU IN CONDITIONS OF EXTERNAL SHOCKS

Kjosevski, Jordan (2025) INFLATION MOVEMENTS IN THE EU IN CONDITIONS OF EXTERNAL SHOCKS. ECONOMIC ANNALS, LXX (246). pp. 7-35.

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Abstract

This study examines the key
factors driving inflation in the European
Union (EU) member states, focusing on
both cost-push and demand-pull effects. By
analysing monthly data from January 2005
to February 2023, the study investigates
how inflation dynamics have evolved over
time, particularly in response to external
shocks such as rising energy prices. Inflation
reached its highest levels in recent decades
in 2022, driven by a combination of cost�push factors, such as rising crude oil prices,
and the demand-pull effects that emerged
in late 2021. The study employs fully modi�fied ordinary least squares (FMOLS) and
dynamic ordinary least squares (DOLS)
methods to analyse long-run inflation de�terminants. These econometric techniques
are used to address potential issues of endo�geneity and serial correlation in the data�set, providing robust and reliable estimates
of inflation trends across the EU. The find�ings reveal that inflation was initially driv�en by cost-push factors, but these pressures
subsided as energy price growth decelerat�ed. From October 2021 onwards, demand�pull effects became more pronounced as ag�gregate demand surged. Additionally, the
study highlights significant disparities in
how EU member states responded to exter�nal energy price shocks, underscoring the
need for more coordinated EU energy poli�cy. Its results suggest that EU policymakers
need to implement more coordinated fiscal
and energy policies to mitigate the impacts
of external price shocks. Future research
should focus on country-specific drivers of
inflation and assess the long-term effects
of coordinated energy strategies within
the union. This study contributes to the
literature by using advanced econometric
methods to analyse inflation dynamics over
an extended period and provides valuable
insights for policymakers, particularly in
addressing the varying impacts of external
shocks across EU mem

Item Type:	Article
Subjects:	Scientific Fields (Frascati) > Social Sciences > Economics and Business
Divisions:	Faculty of Economics
Depositing User:	UKLO Mrezha
Date Deposited:	08 Oct 2025 10:43
Last Modified:	08 Oct 2025 10:43
URI:	https://eprints.uklo.edu.mk/id/eprint/11123

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