The main determinants of inflation of the EU and the US economy: a panel time-series analysis

This paper uses the panel analysis approach to deal with the impact of oil price shocks, unemployment and interest rates on the most fundamental macroeconomic variable, inflation. A data set ranging from 1997 to 2007 is used, separately for the US and the EU economy. In both sets of data, current inflation is heavily affected by unemployment, as expected. The worth noticing difference is that in the US economy, interest rates have a negative relationship with inflation (unlike in the case of the EU), while unemployment plays a more substantial role in the USA in affecting inflation level. Oil prices tend to play a small and distinctive role.