A small estimated euro area model with rational expectations and nominal rigidities

Volker Wieland and Günter Coenen

No 30, Working Paper Series from European Central Bank

Abstract: In this paper we estimate a small model of the euro area to be used as a laboratory for evaluating the performance of alternative monetary policy strategies. We focus on the relationship between output and inflation and investigate the fit of the nominal wage contracting model due to Taylor (1980) and three different versions of the relative real wage contracting model proposed by Buiter and Jewitt (1981) and estimated by Fuhrer and Moore (1995a) for the United States. While Fuhrer and Moore reject the nominal contracting model in favor of the relative contracting model which induces more inflation persistence, we find that both models fit euro area data reasonably well. When considering France, Germany and Italy separately, however, we find that the nominal contracting model fits German data better, while the relative contracting model does quite well in countries which transitioned out of a high inflation regime such as France and Italy. JEL Classification: E31, E52, E58, E61

Keywords: euro area; European Monetary Union; macroeconomic modelling; nominal rigidities; rational expectations (search for similar items in EconPapers)
Date: 2000-09
Note: 241047
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (85)

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Related works:
Journal Article: A small estimated euro area model with rational expectations and nominal rigidities (2005)
Working Paper: A Small Estimated Euro Area Model with Rational Expectations and Nominal Rigidities (2003)
Working Paper: A Small Estimated Euro Area Model with Rational Expectations and Nominal Rigidities (2002)
Working Paper: A Small Estimated Euro-Area Model with Rational Expectations and Nominal Rigidities (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:200030

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