INFLATION, INFLATION UNCERTAINTY AND FUEL PRICES IN THE EU

We investigate the interactions between inflation, inflation uncertainty and fuel prices in the EU-28 countries, over the period 2005 to 2017. We compute the inflation uncertainty as the difference between the recorded level of inflation and one-year inflation forecasts. Our GMM results show a positive impact of inflation uncertainty and fuel prices on inflation. In addition, we show that diesel prices have a larger impact on inflation level compared with gasoline prices. Further, the increase in oil prices over the previous period, and the inflation targeting regime, have no significant influence on inflation. Our results are robust to different models and samples.