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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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  8. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper 0107, Federal Reserve Bank of Cleveland.
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  10. Peter Hordahl & Oreste Tristani & David Vestin, 2003. "A joint econometric model of macroeconomic and term structure," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  11. Gomme, Paul & Klein, Paul, 2011. "Second-order approximation of dynamic models without the use of tensors," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 604-615, April.
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  17. Jinill Kim & Sunghyun Kim & Ernst Schaumburg & Christopher A. Sims, 2003. "Calculating and using second order accurate solutions of discrete time dynamic equilibrium models," Finance and Economics Discussion Series 2003-61, Board of Governors of the Federal Reserve System (U.S.).
  18. Frank Schorfheide, 2003. "Learning and monetary policy shifts," Working Paper 2003-23, Federal Reserve Bank of Atlanta.
  19. Jinill Kim & Sunghyun Kim & Ernst Schaumburg & Christopher A. Sims, 2003. "Calculating and Using Second Order Accurate Solutions of Discrete Time," Levine's Bibliography 666156000000000284, UCLA Department of Economics.
  20. Smets, Frank & Wouters, Raf, 2002. "An estimated stochastic dynamic general equilibrium model of the euro area," Working Paper Series 0171, European Central Bank.
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