Monetary Policy Rules for the Euro Area: What Role for National Information?
Using a simple multi-country econometric model covering the three main countries of the euro area, the paper focuses on the role that can be played by information at the national level in defining the monetary policy of the Union. We find that the performance of a central bank that chooses the nominal interest rate to minimize a standard quadratic loss function of area-wide inflation and output gap improves significantly if the reaction function includes national variables - as opposed to the case in which the interest rate reacts to area-wide variables only. Our results suggest that asymmetries within the euro area are relevant to the central bank; overall, we interpret them as making a case for exploiting the available national information in the conduct of the single monetary policy.
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- Piero Cipollone, 2001. "La convergenza dei salari manifatturieri in Europa," Temi di discussione (Economic working papers) 398, Bank of Italy, Economic Research and International Relations Area.
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- Gerali, Andrea & Lippi, Francesco, 2001.
"On the 'Conquest' of Inflation,"
CEPR Discussion Papers
3101, C.E.P.R. Discussion Papers.
- Filippo Altissimo & Eugenio Gaiotti & Alberto Locarno, 2002.
"Is money informative? Evidence form a large model used for policy analysis,"
Temi di discussione (Economic working papers)
445, Bank of Italy, Economic Research and International Relations Area.
- Altissimo, Filippo & Gaiotti, Eugenio & Locarno, Alberto, 2005. "Is money informative? Evidence from a large model used for policy analysis," Economic Modelling, Elsevier, vol. 22(2), pages 285-304, March.
- Filippo Altissimo & Eugenio Gaiotti & Alberto Locarno, 2004. "Is money informative? Evidence from a large model used for policy analysis," Macroeconomics 0404018, EconWPA, revised 24 Apr 2004.
- Bonaccorsi di Patti, Emilia & Gobbi, Giorgio, 2001. "The changing structure of local credit markets: Are small businesses special?," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2209-2237, December.
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