Domestic and Global Determinants of Inflation: Evidence from Expectile Regression*

This paper investigates the role of domestic and global determinants core inflation in euro area. We analyse entire conditional distribution by estimating a Phillips curve type relationship with method expectile regression, here extended to capture time-varying effects. Both foreign output gap appear drive area inflation. Domestic has bigger influence right tail than left tail, providing evidence nonlinearity curve. In perspective, we find an increase response at lower quantiles higher pass-through prices all regions distribution. Overall, on so-called ‘globalization hypothesis’ is mixed as impact slack remained broadly stable over time.