Causes of Inflation in Europe, the United States and Japan: Some lessons for maintaining price stability in the EMU from a structural VAR approach*

Wesche as well as from participants of the session on " European Monetary Integration I " at the 47th International Atlantic Economic Conference, Vienna, and from an anonymous referee on this version of the paper. Of course, all remaining errors are those of the author. The views expressed are the author's and do not necessarily correspond to those of the Oesterreichische Nationalbank or those of the OECD.Abstract Price stability being among the primary goals of EMU monetary policy, it should be interesting to analyse the factors that led to the disinflationary developments of the last years. Using a structural VAR approach with long-run identifying restrictions derived from an open-economy macro model, various factors of inflation for Austria, Germany, Italy, the United Kingdom, the United States and Japan and the extent to which they have contributed to inflation are analysed. These factors are energy price shocks, supply shocks, wage setting influences, demand and exchange rate disturbances and money supply surprises. The latter three are also used to calculate core inflation. Within a smaller model for aggregate EMU data, supply and demand influences are analysed. While supply and demand factors have generally contributed to the inflation decline, monetary policy, enhanced competition, low energy prices and moderate wage setting are featuring most prominent in the recent disinflation process.