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Monetary Policy in a Monetary Union: What Role for Regional Information?

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Author Info
Paolo Angelini (Economic Outlook and Monetary Policy Department, Bank of Italy)
Paolo Del Giovane (Economic Outlook and Monetary Policy Department, Bank of Italy)
Stefano Siviero (Economic Outlook and Monetary Policy Department, Bank of Italy)
Daniele Terlizzese (Einaudi Institute for Economics and Finance, and Bank of Italy)

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Abstract

Can the central bank of a monetary union, whose objectives are exclusively defined in terms of union-wide variables, improve its performance by reacting to regional variables rather than to union-wide variables only? Our answer is not clear-cut. We find the improvement to be large when we use a backward-looking model of the economy and negligible when we use a hybrid model. The main determinant of this finding seems to be the different degree of inertia (or its opposite, the forward-lookingness) characterizing the two models, rather than other model features.

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Publisher Info
Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 4 (2008)
Issue (Month): 3 (September)
Pages: 1-28
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Handle: RePEc:ijc:ijcjou:y:2008:q:3:a:1

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E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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  5. Paolo Angelini & Paolo Del Giovane & Stefano Siviero & Daniele Terlizzese, 2002. "Monetary Policy Rules for the Euro Area: What Role for National Information?," Temi di discussione (Economic working papers) 457, Bank of Italy, Economic Research Department. [Downloadable!]
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