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Euro area inflation persistence in an estimated nonlinear

  • Gianni Amisano

    (University of Brescia)

  • Oreste Tristani

    (European Central Bank)

We estimate the approximate nonlinear solution of a small DSGE model using Bayesian methods. Our results, based on euro area data, suggest that this approch delivers sharper inference compared to the estimation of the linearised solution. The nonlinear model can also account for richer economic dynamics. The impulse responses of inflation to structural shocks may vary depending on initial conditions: they are much more persistent when inflation is significantly above its long run equilibrium level

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 347.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:347
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