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Inflation and Growth in the Euro Zone

Author

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  • Dino Martellato

    (Department of Economics, University Of Venice Ca� Foscari)

Abstract

Although euro area-wide inflation was from 1999 to 2005 almost right, i.e. �close to balance, but below 2%�, and although it combined with real growth as predicted by the long-run money demand equation in the euro area, the picture that emerges at country level is more scattered. Inside a monetary union, inflation divergences could be destabilizing and an excessive dispersion could be a problem, thus the scattered performance of the single members in terms of HICP inflation and real growth is an issue that the euro area governance is illprepared to manage. It may be of interest, therefore, to understand whether observed differences come from the money market or from the costs side or from the interaction between supply and demand when agents are forward looking. The paper sets out to ascertain whether the patterns of inflation and growth data observed in the twelve members and Slovenia compare to what is predicted by the long-run money demand equation in the euro area, the Balassa-Samuelson construct or the New Keynesian model.

Suggested Citation

  • Dino Martellato, 2006. "Inflation and Growth in the Euro Zone," Working Papers 2006_52, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2006_52
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    References listed on IDEAS

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    More about this item

    Keywords

    Inflation; stability; euro zone;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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