The case for a positive euro area inflation target: Evidence from france, germany and italy

Klaus Adam, Erwan Gautier, Sergio Santoro and Henning Weber

Journal of Monetary Economics, 2022, vol. 132, issue C, 140-153

Abstract: Using micro price data underlying the consumer price index, we estimate relative price trends over the product life cycle in France, Germany and Italy. Minimizing the welfare consequences of relative price distortions in the presence of these trends requires targeting a significantly positive inflation rate: the steady-state inflation rate jointly maximizing welfare in all three countries ranges between 1.1%-1.7%. The welfare costs of targeting an inflation rate of zero, as suggested by monetary models ignoring relative price trends, or of targeting 4% amount to several percentage points of consumption.

Keywords: Optimal inflation target; Micro price trends; Welfare (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: The Case for a Positive Euro Area Inflation Target: Evidence from France, Germany and Italy (2021)
Working Paper: The Case for a Positive Euro Area Inflation Target: Evidence from France, Germany and Italy (2021)
Working Paper: The Case for a Positive Euro Area Inflation Target: Evidence From France, Germany and Italy (2021)
Working Paper: The Case for a Positive Euro Area Inflation Target: Evidence from France, Germany and Italy (2021)
Working Paper: The case for a positive euro area inflation target: evidence from France, Germany and Italy (2021)
Working Paper: The case for a positive euro area inflation target: Evidence from France, Germany and Italy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:132:y:2022:i:c:p:140-153

DOI: 10.1016/j.jmoneco.2022.09.002

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