4  BIS central bankers’ speeches  On the other hand, producer price inflation for final manufactured goods has been on a downward trend, declining from 7,0 per cent in April to 6,5 per cent in May mainly due to a moderation in price inflation of food, beverages and tobacco products.
The existing literature estimated that only between 40% and 43% of country-specific GDP shocks were smoothed among European countries before 1998, with roughly half of this smoothing achieved through national government budget deficits and half achieved by corporate saving patterns.12 These low levels of risk-sharing contrasted with very high levels within individual European countries; for example, in pre-unification Germany, 91% of shocks to per capita state gross product was smoothed, with the bulk (54%) smoothed through the federal taxtransfer and grant system.13 It was believed that the creation of the common currency might in itself enhance income and consumption smoothing, by reducing the costs of trading and information gathering, thereby  10  Sala-i-Martin, X., and J. Sachs (1992), “Fiscal federalism and optimum currency areas: Evidence for Europe from the United States”, in: M. Canzoneri, P. Masson, and V. Grilli, eds., Establishing a Central Bank: Issues in Europe and Lessons from the U.S., Cambridge University Press: London.