Inflation Targets in a Monetary Union with Endogenous Entry

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Inflation Targets in a Monetary Union with Endogenous Entry

Author Info

Stéphane Auray () (Université Lille 3 (GREMARS), Université de Sherbrooke (GREDI) and CIRPÉE)
Aurélien Eyquem () (GATE, UMR 5824, Université de Lyon and Ecole Normale Supérieure Lettres et Sciences Humaines, France)
Jean-Christophe Poutineau (CREM (UMR 6211) Universite de Rennes 1 and Ecole Normale Superieure de Cachan, France.)

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Abstract

This paper shows that in a monetary union the interest rate rule of the Central Bank should react to the in°ation rate of the Harmonized Index of Consumption Price (HICP) rather than to the inflation rate of the Welfare-Based Consumption Price (WBCP). In a two{country general equilibrium model of the EMU with endogenous entry, we compare both monetary policy regimes and find that targeting the HICP inflation rate reduces the volatility of the Producer Price Index (PPI) in°ation rate and the volatility of the nominal .

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Publisher Info
Paper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 09-02.

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Length: 11 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:shr:wpaper:09-02

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Find related papers by JEL classification:
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-03-14 (All new papers)
NEP-CBA-2009-03-14 (Central Banking)
NEP-MAC-2009-03-14 (Macroeconomics)
NEP-MON-2009-03-14 (Monetary Economics)

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Christian Broda & David W. Weinstein, 2004. "Variety Growth and World Welfare," American Economic Review, American Economic Association, vol. 94(2), pages 139-144, May. [Downloadable!]

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This page was last updated on 2009-11-20.

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