Forecasting inflation and tracking monetary policy in the euro area: does national information help?

Riccardo Cristadoro, Giuseppe Saporito and Fabrizio Venditti

Empirical Economics, 2013, vol. 44, issue 3, 1065-1086

Abstract: The ECB target is set in terms of the year on year growth rate of the euro area Harmonized Index of Consumer Prices. Nonetheless, a good deal of attention is given to national data by market analysts when they try to anticipate monetary policy moves. In this paper we use the Generalized Dynamic Factor Model to develop a set of core inflation indicators that, combining national data with area wide information, allow us to answer two related questions. The first is whether country specific data actually bear any relevance for the future path of area wide price growth, over and above that already contained in area wide data. The second is whether to track ECB monetary policy decisions it is useful to take into account national information and not only area wide statistics. Within our empirical framework we find that once area wide information is properly taken into account the contribution of national idiosyncratic developments is negligible. Copyright Springer-Verlag 2013

Keywords: Forecasting; Dynamic factor model; Inflation; Taylor rule; Monetary policy; C25; E37; E52 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00181-012-0572-6 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Forecasting inflation and tracking monetary policy in the euro area: does national information help? (2008)
Working Paper: Forecasting inflation and tracking monetary policy in the euro area: does national information help? (2008)
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:spr:empeco:v:44:y:2013:i:3:p:1065-1086

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-012-0572-6

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().