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Imperfect information, real-time data and monetary policy in the euro area

Stefano Neri () and Tiziano Ropele ()

No 802, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: An important concern for the European Central Bank (ECB), and all central banks alike, is the necessity of making decisions in real time under conditions of great uncertainty about the underlying state of the economy. We address this concern by estimating on real-time data a New Keynesian model for the euro area under the assumption of imperfect information. In comparison to models that maintain the assumption of perfect information and are estimated on ex-post revised, we find that: (i) the estimated policy rule becomes more inertial and less aggressive towards inflation; (ii) the ECB is confronted with a more severe trade-off in the stabilization of inflation and the output gap.

Keywords: monetary policy; imperfect information; real-time data (search for similar items in EconPapers)
JEL-codes: E47 E52 E58 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Journal Article: Imperfect Information, Real‐Time Data and Monetary Policy in the Euro Area (2012) Downloads
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