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Isabel Schnabel 🇪🇺🇺🇦 Profile picture
@Isabel_Schnabel
May 20, 2021 • 9 tweets • 4 min read • Read on X
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Today we @ecb issued our new digital publication and interactive tool on inflation. It is one of our attempts to better explain the concept & measurement of inflation, its heterogeneity across goods and countries as well as the difference between perceived & actual inflation. 1/8
Chapter 1 explains the concept of inflation and why it matters. You can look at the inflation rate in a particular country for a particular category of goods and services, which gives an impression of the heterogeneity across countries and goods. 2/8
It also show the evolution over time for different countries, distinguishing the overall price index and certain subcategories, which show very different degrees of volatility: food, energy, non-energy industrial goods and services. 3/8
Chapter 2 is on inflation measurement. It explains how the basket of goods underlying the inflation index is compiled and shows the weights of different consumption categories. It also mentions the open issue of how to consider the costs of houses owned by consumers. 4/8
Chapter 3 deals with the distinction between measured inflation, personal actual inflation and personal perceived inflation. It explains the differences and shows how inflation perceptions differ across demographic groups: household income, education, gender and age. 5/8
It also shows that inflation perceptions tend to be substantially higher than measured inflation, that the gap has diminished somewhat over time and that the variation across households is very large. 6/8
Chapter 4 finally contains a personal inflation calculator, developed by @Lietuvosbankas, which allows euro area citizens to calculate their personal inflation rate and compare it with their own perception and with the measured rate for their country. Try it out! 7/8
The new tool was also briefly presented yesterday in the German TV programme #Plusminus @DasErste (in German). 8/8 ardmediathek.de/video/konsum-s…
P.S.: @fwred just reminded me - the publication is available in 23 languages!

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More from @Isabel_Schnabel

Isabel Schnabel 🇪🇺🇺🇦 Profile picture
May 29
In my speech at the BOJ-IMES conference, I reviewed the benefits & costs of asset purchases based on a large body of research. Central banks have used asset purchases for two main purposes: to stabilise financial markets and to ease financing conditions near the lower bound. 1/19
According to the signalling channel, asset purchases signal a commitment to a period of low interest rates, made credible by central banks’ exposures to duration risk. But this has not stopped central banks from raising rates when inflation surged, weakening this channel. 2/19 Image
By contrast, the liquidity channel was powerful in times of stress. In a dash for cash, it is actual purchases that matter. On other occasions, it has been enough to credibly announce the intention to intervene if necessary, even if purchases were zero or small. #OMT #PEPP 3/19 Image
Read 20 tweets
Isabel Schnabel 🇪🇺🇺🇦 Profile picture
Feb 16
As @paulkrugman once noted, “productivity isn't everything, but, in the long run, it is almost everything.” Yet, the euro area’s productivity trajectory has been dismal. In today’s speech @EUI_EU, I asked how euro area firms could be turned from laggards into leaders. 1/20
At the turn of the millennium, the euro area was operating at the global productivity frontier. But in the following years, it fell behind other economies like the United States and has not been able to recover from this loss of competitiveness. 2/20 Image
One root cause is firms’ failure to reap the efficiency gains from information and communication technologies. Over the past decades, a gap in the IT-related capital stock has emerged between the euro area and the United States, also leading to a gap in productivity growth. 3/20 Image
Read 21 tweets
Isabel Schnabel 🇪🇺🇺🇦 Profile picture
Dec 30, 2023
Looking back at 2023, my most interesting (and experimental) communication experience was an interview with @SZ without words. #SagenSieJetztNichts #InterviewWithoutWords 1/14
sz-magazin.sueddeutsche.de/sagen-sie-jetz…
First question: What is inflation? 2/14 Image
What does it look like when you want to convince Christine @Lagarde? 3/14 Image
Read 14 tweets
Isabel Schnabel 🇪🇺🇺🇦 Profile picture
Nov 3, 2023
Yesterday I had the pleasure to deliver the Homer Jones Memorial Lecture at the @stlouisfed. In my speech I compared the disinflation process to long-distance running, arguing that "the last mile" is likely to be the hardest. 1/23
Headline inflation in the euro area declined rapidly to 2.9% in October from its peak of 10.6% one year earlier. The bulk of this large drop reflects the substantial decline in the contributions from energy and food inflation. 2/23 Image
This is largely due to base effects. Oil and gas prices have come down fast from the highs in the aftermath of Russia’s invasion of Ukraine. According to a recent IMF study, such base effects in the past have often given rise to “premature celebrations”. 3/23 Image
Read 24 tweets
Isabel Schnabel 🇪🇺🇺🇦 Profile picture
Sep 27, 2023
In my #ThünenLecture @VfS_econ, I discussed the role of money in explaining the recent surge in inflation in the euro area. According to the quantity theory of money, there is a long-run one-to-one relationship between money growth and inflation. 1/23
Cross-sectional and time series evidence have for a long time provided strong support in favour of a stable long-run relationship between money and prices. Across countries, the long-run averages of inflation and excess money growth fall near the 45-degree line. 2/23 Image
However, this relationship was found to weaken substantially in an environment of low and stable inflation. The findings of a unit slope critically depended on the inclusion of high-inflation episodes. 3/23 Image
Read 23 tweets
Isabel Schnabel 🇪🇺🇺🇦 Profile picture
May 20, 2023
In conclusion, central banks have an important role to play as lenders of last resort to tackle liquidity crises. Even in high-inflation periods separation can be ensured if tools are targeted and temporary, and the underlying issue is one of liquidity rather than solvency. 25/30
Monetary policymakers cannot address solvency issues. A sound financial regulation and supervision are the best protection against financial dominance, just as a functioning fiscal framework is needed to protect against fiscal dominance. 26/30
Taking financial stability into account is not just about market stabilisation. Central banks need to consider the side effects of monetary policy measures. We need to reflect on how our own actions may have contributed to the build-up of financial fragilities. 27/30
Read 6 tweets

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