Interpreting Euro area inflation at high and low frequencies

Stefan Gerlach (hms.gerlach@gmail.com) and Katrin Assenmacher

No 195, BIS Working Papers from Bank for International Settlements

Abstract: Several authors have recently interpreted the ECB's two-pillar framework as separate approaches to forecast and analyse inflation at different time horizons or frequency bands. The ECB has publicly supported this understanding of the framework. This paper presents further evidence on the behaviour of euro area inflation using band spectrum regressions, which allow for a natural definition of the short and long run in terms of specific frequency bands, and causality tests in the frequency domain. The main finding is that variations in inflation are well explained by low-frequency movements of money and real income growth and high-frequency fluctuations of the output gap.

Keywords: frequency domain; quantity theory; money growth; inflation; spectral regression (search for similar items in EconPapers)
JEL-codes: C22 E3 E5 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2006-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (60)

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Related works:
Journal Article: Interpreting euro area inflation at high and low frequencies (2008)
Working Paper: Interpreting Euro Area Inflation at High and Low Frequencies (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:195

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