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This chapter aims at assessing the long-run determinants and the short-run dynamics of inflation in each country belonging to the European Monetary Union (EMU). Our workcomplements the recent literature on this topic for the Euro Area as a whole. Detecting such determinants can be crucial in designing structural reforms acting as aside instruments of monetary policy in maintaining price stability. The empirical methodology consists of a reinterpretation of the structural cointegrating VAR approach, which allows for a structural long-run analysis of inflation determinants along with an accurate assessment of its short-run dynamics. The main conclusion emerging from the estimates is that not only the determinantsof inflation differ in the countries belonging to the Euro Area, but also that cost-push factors have a considerable role in explaining inflation in most of the countries examined. As a policy implication, a tight monetary policy pursued in those countries whose inflation is mainlydriven by costs would result in a contraction of economic activity without exerting relevant effects on price dynamics.

Does One Monetary Policy Fit All? The Determinants of Inflation in Emu Countries