Une estimation de la cible implicite d inflation dans la zone euro

P. F ve, Julien Matheron and Jean-Guillaume Sahuc
Authors registered in the RePEc Author Service: Patrick Fève

Working papers from Banque de France

Abstract: Euro area countries as a whole have experienced a marked downward trend over the 1980s. Over this period, the unemployment rate has increased and economic activity has been sluggish. Changes in the implicit inflation target, viewed as low frequency movements of inflation, might possibly explain these developments. To highlight this issue, the present study estimates the dynamics of the implicit inflation target in the euro zone over the period 1970Q1-2004Q4. Based on a small macroeconometric model, the implicit target, not known by the econometrician, is identified through a minimal set of theoretical restrictions: (i) the inflation target is a non stationary process, (ii) inflation is a monetary phenomenon in the long-run, and (iii) changes in the implicit target have no long-run effects whatsoever on real variables. The model is estimated so as to match output growth, changes in inflation and the ex post real interest rate. Our main results are: (i) inflation target shocks account for the bulk of nominal fluctuations; (ii) due to monetary policy inertia and nominal stickiness, changes in the target generate large swings in the real interest rate translating into substantial short-run effects on real variables; (ii) in spite of this inflation target shocks moderately impact on output dynamics.

Keywords: Implicit inflation target; Macroeconometric modelling; Euro area. (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Related works:
Journal Article: Une estimation de la cible implicite d’inflation dans la zone euro (2009)
Working Paper: Une estimation de la cible implicite d’inflation dans la zone euro (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:246

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