Inflation and relative price variability in the euro area: evidence from a panel threshold model
AbstractIn recent macroeconomic theory, relative price variability (RPV) generates the central distortions of inflation. This paper provides first evidence on the empirical relation between inflation and RPV in the euro area focusing on threshold effects of inflation. We find that expected inflation significantly increases RPV if inflation is either very low (below -1.38% p.a.) or very high (above 5.94% p.a.). In the intermediate regime, however, expected inflation has no distorting effects which supports price stability as an outcome of optimal monetary policy. --
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Bibliographic InfoPaper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2006,14.
Date of creation: 2006
Date of revision:
Inflation; Relative Price Variability; Panel Threshold Models;
Other versions of this item:
- Dieter Nautz & Juliane Scharff, 2012. "Inflation and relative price variability in the euro area: evidence from a panel threshold model," Applied Economics, Taylor & Francis Journals, vol. 44(4), pages 449-460, February.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-05 (All new papers)
- NEP-CBA-2006-08-05 (Central Banking)
- NEP-EEC-2006-08-05 (European Economics)
- NEP-ETS-2006-08-05 (Econometric Time Series)
- NEP-MAC-2006-08-05 (Macroeconomics)
- NEP-MON-2006-08-05 (Monetary Economics)
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