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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Paolo Angelini & Paolo Del Giovane & Stefano Siviero & Daniele Terlizzese, 2008. "Monetary Policy in a Monetary Union: What Role for Regional Information?," International Journal of Central Banking, International Journal of Central Banking, vol. 4(3), pages 1-28, September.
  • Handle: RePEc:ijc:ijcjou:y:2008:q:3:a:1
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    3. Schäfer Benjamin, 2018. "The Impact of the Crisis and Unconventional Monetary Policy on European Inflation Dynamics: Evidence from a Three-Period Structural Model and Six Countries," Review of Economics, De Gruyter, vol. 69(2), pages 87-110, August.

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    JEL classification:

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

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