Resilience of consumer prices level to international trade shocks in European Union

Abstract

Inflation in most of the countries of the European Union has recently increased significantly. One of the main reasons for this is higher imports and, especially, energy prices. It is very important to investigate the specific characteristics of this process in different countries to better understand the reasons why countries are different in sensitivity to international shocks. This knowledge helps to improve inflation control. The results of a statistical analysis of 1269 balanced panel observations have revealed differences in inflationary reactions in European countries and possible reasons for these differences. These shocks were most significant in Lithuania, Estonia, Latvia, and Hungary.