Monetary Policy in a Monetary Union: What Role for Regional Information?

Paolo Angelini (), Paolo Del Giovane, Stefano Siviero () and Daniele Terlizzese ()
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Paolo Del Giovane: Economic Outlook and Monetary Policy Department, Bank of Italy

International Journal of Central Banking, 2008, vol. 4, issue 3, pages 1-28

Abstract: Can the central bank of a monetary union, whose objectives are exclusively defined in terms of union-wide variables, improve its performance by reacting to regional variables rather than to union-wide variables only? Our answer is not clear-cut. We find the improvement to be large when we use a backward-looking model of the economy and negligible when we use a hybrid model. The main determinant of this finding seems to be the different degree of inertia (or its opposite, the forward-lookingness) characterizing the two models, rather than other model features.

JEL-codes: E52 (search for similar items in EconPapers)
Date: 2008
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