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Controlling inflation in Euroland

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  • Karen Cabos
  • Nikolaus Siegfried

Abstract

The experience with the two pillar strategy of the European Central Bank (ECB) suggests that at some point in the future the ECB may have to commit to one of the more traditional policy strategies - a direct inflation target or an intermediate monetary target. This study offers some information on the scale of control and indicator problems associated with both strategies. We estimate the links between monetary policy actions and inflation in dynamic linear models with the Kalman filter. Using European M3 that the ECB has published, it is found that the overall control problems involved in targeting money are larger than for direct inflation targets.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 36 (2004)
Issue (Month): 6 ()
Pages: 549-558

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Handle: RePEc:taf:applec:v:36:y:2004:i:6:p:549-558

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  1. Gabriel Fagan & JÊrÆme Henry, 1998. "Long run money demand in the EU: Evidence for area-wide aggregates," Empirical Economics, Springer, vol. 23(3), pages 483-506.
  2. Lars E O Svensson, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Bank of England working papers 56, Bank of England.
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Cited by:
  1. Martha Misas A. & Carlos Esteban Posada P & Diego Mauricio Vásquez E, 2003. "¿Está determinado el nivel de precios por las expectativas de dinero y producto en Colombia?," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  2. Melisso Boschi & Alessandro Girardi, 2005. "Euro Area inflation: long-run determinants and short-run dynamics," ISAE Working Papers 60, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).

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