Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial Frictions and Inflation Differentials in a Monetary Union

Contents:

Author Info

  • Nikolay Hristov

    ()

  • Oliver Hülsewig
  • Timo Wollmershäuser

Abstract

This paper employs a stylized New Keynesian DSGE model for a monetary union to analyze whether cyclical inflation differentials can be explained by cross-country differences concerning the characteristics of financial markets. Our results suggest that empirically plausible degrees of heterogeneity with respect to two important credit market characteristics - namely the fraction of borrowers and to a lesser extent the loan-to-value ratio - generate inflation differentials that are similar to those implied by structural differences with respect to price inertia and the degree of competitiveness. Hence, the characteristics of financial markets should be seen as a possible alternative explanation for the observable inflation dispersion in the EMU.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-11/cesifo1_wp3235.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3235.

as in new window
Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:ces:ceswps:_3235

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: monetary union; inflation; differentials; collateral constraints; cross-country heterogeneity; household indebtedness;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Michael B. Devereux & James Yetman, 2010. "Leverage Constraints and the International Transmission of Shocks," NBER Working Papers 16226, National Bureau of Economic Research, Inc.
  2. Pau Rabanal & Oriol Aspachs-Bracons, 2009. "The Drivers of Housing Cycles in Spain," IMF Working Papers, International Monetary Fund 09/203, International Monetary Fund.
  3. Angeloni, Ignazio & Ehrmann, Michael, 2004. "Euro area inflation differentials," Working Paper Series, European Central Bank 0388, European Central Bank.
  4. Pau Rabanal, 2009. "Inflation Differentials between Spain and the EMU: A DSGE Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(6), pages 1141-1166, 09.
  5. repec:cbi:qtbart:y:2005:m:10:p:87-114 is not listed on IDEAS
  6. Stephanie Schmitt-Grohe & Martin Uribe, 2002. "Closing Small Open Economy Models," NBER Working Papers 9270, National Bureau of Economic Research, Inc.
  7. Luis J. Alvarez, 2007. "What Do Micro Price Data Tell Us on the Validity of the New Keynesian Phillips Curve?," Kiel Working Papers, Kiel Institute for the World Economy 1330, Kiel Institute for the World Economy.
  8. Coenen, Günter & Straub, Roland, 2005. "Does government spending crowd in private consumption? Theory and empirical evidence for the euro area," Working Paper Series, European Central Bank 0513, European Central Bank.
  9. Darracq Pariès, Matthieu & Notarpietro, Alessandro, 2008. "Monetary policy and housing prices in an estimated DSGE for the US and the euro area," Working Paper Series, European Central Bank 0972, European Central Bank.
  10. Vincent Sterk, 2009. "Credit Frictions and the Comovement between Durable and Non-durable Consumption," DNB Working Papers, Netherlands Central Bank, Research Department 210, Netherlands Central Bank, Research Department.
  11. Zvi Hercowitz & Jeffrey C. Campbell, 2005. "The Role of Collateralized Household Debt in Macroeconomic Stabilization," 2005 Meeting Papers, Society for Economic Dynamics 120, Society for Economic Dynamics.
  12. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  13. Luca Sessa & Libero Monteforte & Lorenzo Forni, 2007. "The general equilibrium effects of fiscal policy: estimates for the euro area," 2007 Meeting Papers, Society for Economic Dynamics 352, Society for Economic Dynamics.
  14. Aqib Aslam & Emiliano Santoro, 2008. "Bank Lending, Housing and Spreads," Discussion Papers, University of Copenhagen. Department of Economics 08-27, University of Copenhagen. Department of Economics, revised Nov 2008.
  15. Eric Jondeau & Jean-Guillaume Sahuc, 2008. "Optimal Monetary Policy in an Estimated DSGE Model of the Euro Area with Cross-Country Heterogeneity," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 4(2), pages 23-72, June.
  16. Tommaso Monacelli, 2006. "Optimal Monetary Policy with Collateralized Household Debt and Borrowing Constraints," NBER Working Papers 12470, National Bureau of Economic Research, Inc.
  17. Andrés, Javier & Ortega, Eva & Vallés, Javier, 2008. "Competition and inflation differentials in EMU," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 32(3), pages 848-874, March.
  18. Mongelli, Francesco Paolo, 2002. ""New" views on the optimum currency area theory: what is EMU telling us?," Working Paper Series, European Central Bank 0138, European Central Bank.
  19. Jonathan Crook & Stefan Hochguertel, 2007. "US and European Household Debt and Credit Constraints," Tinbergen Institute Discussion Papers, Tinbergen Institute 07-087/3, Tinbergen Institute.
  20. Monacelli, Tommaso, 2006. "New Keynesian Models, Durable Goods and Collateral Constraints," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5916, C.E.P.R. Discussion Papers.
  21. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(3), pages 383-398, September.
  22. Alessandro Calza & Tommaso Monacelli & Livio Stracca, 2013. "Housing Finance And Monetary Policy," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 11, pages 101-122, 01.
  23. Nathalie Girouard & Mike Kennedy & Christophe André, 2006. "Has the Rise in Debt Made Households More Vulnerable?," OECD Economics Department Working Papers, OECD Publishing 535, OECD Publishing.
  24. Ivo J.M. Arnold & Casper G. de Vries, 1999. "Endogenous Financial Structure and the Transmission of ECB Policy," Tinbergen Institute Discussion Papers, Tinbergen Institute 99-021/2, Tinbergen Institute.
  25. Margarita Rubio, 2009. "Housing market heterogeneity in a monetary union," Banco de Espa�a Working Papers, Banco de Espa�a 0916, Banco de Espa�a.
  26. Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series, European Central Bank 0040, European Central Bank.
  27. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 739-764, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gareis, Johannes & Mayer, Eric, 2012. "Financial market heterogeneity: Implications for the EMU," W.E.P. - Würzburg Economic Papers, University of Würzburg, Chair for Monetary Policy and International Economics 90, University of Würzburg, Chair for Monetary Policy and International Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3235. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.