Monetary policy of the European Monetary Union targets aggregate euro area inflation. Concerns are growing that a focus on aggregate inflation may cause national inflation rates to diverge. While different explanations for diverging aggregate euro area inflation have been brought forward, the...

We estimate the impact on US non-residential fixed investment of permanent and temporary inflation uncertainty. We find that while both have a negative effect, temporary uncertainty is more important for investment. This study has implications for monetary policy and applied-econometric practice