Global Imbalances and Imported Disinflation in the Euro Area

Barthélemy, J. and G. Cl aud
Authors registered in the RePEc Author Service: Jean Barthélemy

Working papers from Banque de France

Abstract: We estimate a medium-scale DSGE model for the euro area in an open economy framework. The model includes structural trends on all variables, which allow us to estimate on gross data. We first provide a theoretical balanced growth path consistent with permanent productivity shocks, inflation target changes, and permanent shocks to the openness of the economies. We then define the cycle as the gap between this sustainable trajectory and the gross data, thus our model properly deals with deviations of the trade balance. Finally, we find persistent and strong effects from the asymmetric increase of euro area imports during the last ten years on domestic inflation. From the first quarter of 2000 to the last quarter of 2008, we estimate the contribution of the imbalanced development of international trade on euro area inflation to an average of -0.7%, and on the 3-Month interest rate to an average of -1.4%.

Keywords: Global Imbalances; Disinflation; Business Fluctuations; Open Economy Macroeconomics. (search for similar items in EconPapers)
JEL-codes: E32 F41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Global Imbalances and Imported Disinflation in the Euro Area (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:329

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