Arbitrage entre fluctuations de l'inflation et de l'activité au niveau de la zone “euro”

Catherine Bac

Economie & Prévision, 2001, vol. n° 150-151, issue 4, 47-58

Abstract: This study estimates the long-term trade-off between variance of inflation and variance of output facing the European monetary authorities. When the central bank pursues inflation and output gap objectives, its choice represents the limit of optimum monetary policy. A structural VAR model is used to determine a rule for optimum monetary policy. By modifying the weighting of the stabilisation objectives for growth and inflation fluctuations, respectively, we can empirically determine a long-term trade-off between the two. Application to the European series shows that monetary policy is more effective in controlling inflation than output. There seems in particular to be an incompressible threshold below which it is impossible to reduce the output variance. Moreover, the trade-off becomes very tight when the variance of inflation drops below 1%. This result suggests that when inflation is the only concern of the central bank, the output variance can be expected to be high.

Keywords: monetary policy; structural autoregressive vector; based models (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.cairn.info/load_pdf.php?ID_ARTICLE=ECOP_150_0047 (application/pdf)
http://www.cairn.info/revue-economie-et-prevision-1-2001-4-page-47.htm (text/html)
free

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cai:ecoldc:ecop_150_0047

Access Statistics for this article

More articles in Economie & Prévision from La Documentation Française
Bibliographic data for series maintained by Jean-Baptiste de Vathaire ().