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Does the ECB consider the persistence of inflation differentials?

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  • Hamza Bennani

    ()
    (University of Lille 1)

Abstract

We assess the relevance of the monetary policy of the ECB in the context of persistent inflation differentials among euro area members and ask whether it takes into account this structural difference. Our results reveal that the ECB has adopted an appropriate monetary policy rule to prevent low inflation countries from a deflationary spiral, but that it did not consider the negative effects induced as a consequence on the countries with a higher inflation rate. This raises the question of the ECB monetary policy responsibility in the triggering and the worsening of the euro debt crisis.

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File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I3-P199.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 3 ()
Pages: 2129-2139

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Handle: RePEc:ebl:ecbull:eb-13-00503

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Related research

Keywords: Taylor rule; European Central Bank; monetary policy; inflations differentials.;

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References

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  1. MacDonald, Ronald & Wójcik, Cezary, 2008. "Catching-up and inflation differentials in a heterogeneous monetary union: Some implications for the euro area and new EU Member States," Economic Systems, Elsevier, vol. 32(1), pages 4-16, March.
  2. Julien Licheron, 2009. "Politique monétaire de la bce et inertie des taux d'intérêt. Quel rôle pour les indicateurs d'inflation nationaux ?," Revue économique, Presses de Sciences-Po, vol. 60(3), pages 713-725.
  3. John Shea, 1996. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," NBER Technical Working Papers 0193, National Bureau of Economic Research, Inc.
  4. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  5. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
  6. Emmanuel Dubois & Jerome Hericourt & Valerie Mignon, 2009. "What if the euro had never been launched? A counterfactual analysis of the macroeconomic impact of euro membership," Economics Bulletin, AccessEcon, vol. 29(3), pages 2241-2255.
  7. Alberto Montagnoli & Andros Gregoriou & Alexandros Kontonikas, 2007. "Euro Area Inflation Differentials: Unit Roots, Structural Breaks and Non-Linear Adjustment," Working Papers 2007_13, Business School - Economics, University of Glasgow.
  8. Pierre L. Siklos & Martin T. Bohl, 2007. "Asset Prices as Indicators of Euro Area Monetary Policy: An Empirical Assessment of Their Role in a Taylor Rule," Working Paper Series 32-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
  9. Michael Woodford, 2003. "Optimal Interest-Rate Smoothing," Review of Economic Studies, Wiley Blackwell, vol. 70(4), pages 861-886, October.
  10. Nikolaos Giannellis, 2010. "Nonlinearity and Inflation Rate Differential Persistence: Evidence from the Eurozone," Working Papers 1011, University of Crete, Department of Economics, revised 01 Oct 2010.
  11. Balázs Égert, 2007. "Real Convergence, Price Level Convergence and Inflation Differentials in Europe," Working Papers 138, Oesterreichische Nationalbank (Austrian Central Bank).
  12. Marcus Drometer & Thomas Siemsen & Sebastian Watzka, 2013. "The Monetary Policy of the ECB: A Robin Hood Approach?," CESifo Working Paper Series 4178, CESifo Group Munich.
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Cited by:
  1. Bennani, Hamza, 2014. "Does one word fit all? The asymmetric effects of central banks' communication policy," MPRA Paper 57150, University Library of Munich, Germany.

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