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Financial Frictions and Inflation Differentials in a Monetary Union

  • Hristov, Nikolay
  • Hülsewig, Oliver
  • Wollmershäuser, Timo

This paper presents a stylized New Keynesian dynamic stochastic general equilibrium (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, i.e. the access to credit and the fraction of households holding debt, are a relevant source of inflation dispersion across European Monetary Union (EMU) member countries.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 19365.

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Date of creation: 2013
Date of revision:
Publication status: Published in Manchester School (2013)
Handle: RePEc:lmu:muenar:19365
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Web page: http://www.vwl.uni-muenchen.de

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  8. Nathalie Girouard & Mike Kennedy & Christophe André, 2006. "Has the Rise in Debt Made Households More Vulnerable?," OECD Economics Department Working Papers 535, OECD Publishing.
  9. Tommaso Monacelli, 2008. "Optimal Monetary Policy with Collateralized Household Debt and Borrowing Constraints," NBER Chapters, in: Asset Prices and Monetary Policy, pages 103-146 National Bureau of Economic Research, Inc.
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  11. 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, vol. 4(2), pages 23-72, June.
  12. Alessandro Calza & Tommaso Monacelli & Livio Stracca, 2013. "Housing Finance And Monetary Policy," Journal of the European Economic Association, European Economic Association, vol. 11, pages 101-122, 01.
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  18. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  19. 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 0972, European Central Bank.
  20. Mojon, Benoît, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
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  25. Sterk, Vincent, 2010. "Credit frictions and the comovement between durable and non-durable consumption," Journal of Monetary Economics, Elsevier, vol. 57(2), pages 217-225, March.
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