Price Inertia and Nominal Aggregate Demand in Major European Countries

Christian Bordes, Michael Driscoll and Marc-Olivier Strauss-Kahn
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Christian Bordes: université de Limoges and Banque de France
Michael Driscoll: Middlesex Polytechnic

No 1989021, Discussion Papers (REL - Recherches Economiques de Louvain) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: In this paper we report new evidence on the importance of price level inertia in the four major European countries : Germany, Prance, Italy and the United Kingdom. We focus on the sensitivity of the results to different proxies for aggregate demand and different measures of equilibrium (or trend output). Overall, our results confirm the findings of related studies, and show that price level inertia is present to a significant degree in Europe. In addition, monetary aggregates appear to be a poor proxy for aggregate demand because of systematic movements in velocity.

Pages: 26
Date: 1989-06-01
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvre:1989021

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