This paper contributes to the literature on the price Phillips curve by exploiting subnational regional data from 11 euro area countries. Beyond controlling for aggregate fluctuations common across euro area regions, our approach accounts for country-specific dynamics, including national inflation expectations, thereby addressing key limitations in previous studies. Our results suggest that the Phillips curve in the euro area is relatively flat, but statistically significant. Furthermore, we provide novel evidence on potential nonlinearities in the price Phillips curve and highlight the critical role of properly accounting for country-specific factors such as inflation expectations. These findings provide new insights for the conduct of monetary policy and underscore the value of regional data in euro area macroeconomic analysis.
Nothing contributes so much to the prosperity and happiness of a country as high profits