, i. ( 2016 ), “ advanced economy inflation : the role of global factors ”, working paper series, no 1948, ecb, august. 11. forbes, k. j. ( 2019 ), “ inflation dynamics : dead, dormant, or determined abroad? ”, nber working paper series, no 26496, november. 12. the chart shows the sum of hicp weights of “ cyclical ” and “ non - cyclical ” series in core inflation. this is calculated by running regressions of each component of core inflation at coicop 4 level across various specifications containing the output gap. if any of those beats an ar ( 1 ) model in terms of mean square forecast error on average over the next four quarters, then that component is classified as “ cyclical ”. 13. a recent study finds that a 1 percentage point higher trade balance - to - gdp ratio in the euro area is associated with price inflation that is 16 to 40 basis points lower. see galstyan, v. ( 2019 ), “ inflation and the current account in the euro area ”, economic letter, vol. 2019, no 4, central bank of ireland. 14. “ underlying inflation ”, or “ core inflation ”, is inflation excluding food and energy. 15. for a comparison of growth in real domestic demand between the united states and the euro area, see panetta, f. ( 2021 ), “ mind the gap ( s ) : monetary policy and the way out of the pandemic ”, speech at an online event organised by bocconi university, milan, 2 march. 16. this is true especially in emerging markets, which have less developed financial markets. see caballero, r. j., farhi, e. and gourinchas, p. - o. ( 2016 ), “ safe asset scarcity and aggregate demand ”, american economic review, vol. 106, no 5, pp. 513 - 518 ; del negro, m., giannone, d., giannoni, m. p. and tambalotti, a. ( 2017 ), “ safety, liquidity, and the natural rate of interest ”, brookings papers on economic activity, vol. 48, no 1, pp. 235 - 316 ; glick, r. ( 2020 ), “ r * and the global economy ”, journal of international money and finance, vol. 102 ( c ) ; ferreira

rate of unemployment ) benefits less advantaged groups more. specifically, a 1 percentage point narrowing of the unemployment gap reduces the unemployment rate of ‘ low - skilled ’ workers by 1. 3 percentage points more than the unemployment rate of ‘ high - skilled ’ workers, and it reduces the unemployment rate of young workers by 0. 7 percentages points more than the unemployment rate of old workers. 31. dieppe, a. ( ed. ) ( 2020 ), “ global productivity : trends, drivers, and policies ”, world bank. 32. the magnitude of such effects after the pandemic is unclear ( see imf ( 2021 ), “ after - effects of the covid - 19 pandemic : prospects for medium - term economic damage ”, world economic outlook – managing divergent recoveries, april ). however, the recovery from the global financial crisis should serve as a cautionary tale. ecb research finds that demand shocks accounted for around one - third of the longer - term productivity decline after the crisis ( see dieppe, a., francis, n. and kindberg - hanlon, g. ( 2021 ), “ technology and demand drivers of productivity dynamics in developed and emerging market economies ”, working paper series, no 2533, ecb, april ). this research also finds that economies can limit such scarring effects if fiscal policy acts strongly to offset demand weakness. 33. beyond both the measures already factored into the ecb ’ s baseline for our march projections and measures recently announced by national governments. 34. this is an ex ante calculation based on an increase in public investment by 0. 5 % of gdp in 2021 and 2. 3 % in 2022. ex post, i. e. factoring in the growth - enhancing impact of the extra investment spending, budgetary costs compared with the baseline are 1. 6 % in total for 2021 and 2022. copyright 2021, european central bank