Euro area inflation differentials

Ignazio Angeloni () and Michael Ehrmann

No 388, Working Paper Series from European Central Bank

Abstract: We build a stylised 12-country model of the euro area and use it to analyse why differences in national inflation and growth rates arise within the European monetary union. We find that inflation persistence is a key potential explanatory factor. Other more frequently mentioned reasons, like country-specific shocks or differences in the monetary transmission mechanism across countries, count less. We also look at how a monetary policy geared to area-wide average inflation affects these differentials. Our model suggests that area-wide inflation stability and low inflation differentials are complementary. JEL Classification: E31, E32, E52, F42

Keywords: currency union; euro area; inflation differentials; inflation persistence (search for similar items in EconPapers)
Date: 2004-09
Note: 203739
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Citations: View citations in EconPapers (93)

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Related works:
Journal Article: Euro Area Inflation Differentials (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2004388

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