Causes and Implications of Elevated Inflation in Cyprus

Inflation has risen sharply in Cyprus, initially driven by imported prices, but increasingly broadening to domestic prices. A Phillips Curve estimate attributes the high inflation largely to energy prices, external price pressures, and inflation expectations at the end of 2022.
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Volume/Issue: Volume 2023 Issue 042
Publication date: July 2023
ISBN: 9798400247453
$15.00
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Topics covered in this book

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Inflation , Economics- Macroeconomics , Money and Monetary Policy , Public Finance , International - Economics , Cyprus , Inflation , Import Prices , Energy Prices , Phillips Curve , Wages , inflation expectation , C , inflation driver , inflation shock , E , inflation outlook , Phillips Curve estimate , Energy pricing , Oil prices , Income , Europe

Summary

Inflation has risen sharply in Cyprus, initially driven by imported prices, but increasingly broadening to domestic prices. A Phillips Curve estimate attributes the high inflation largely to energy prices, external price pressures, and inflation expectations at the end of 2022. Historically high pass-through of inflation shocks to wages—amplified by a tight labor market—may make inflation persistent. This calls for policies to stem inflationary pressures while protecting vulnerable households.