Euro Area inflation: long-run determinants and short-run dynamics

Melisso Boschi () and Alessandro Girardi

No 60, ISAE Working Papers from ISTAT - Italian National Institute of Statistics - (Rome, ITALY)

Abstract: This study adopts the long-run structural VAR approach to analyse the determinants of inflation in the Euro Area economy over the period 1985:1- 2003:2. Theoretical relationships link inflation to markup and output gap, respectively. The short-run dynamic properties of inflation are investigated using a structural VECM. Inflation is explained by a mixture of supply- and demandside factors, both in the long- and the short-run. Our simulation exercise indicates that a positive shock to inflation could have a favourable redistributional income effect on wage earners and non-detrimental consequences either on productivity and on competitiveness. Finally, the model produces satisfactory out-of-sample forecasts.

Keywords: Inflation; markup; Euro Area; long-run structural VARs; subset VECM; impulse response analysis; forecasting (search for similar items in EconPapers)
JEL-codes: C32 E00 E31 E37 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://lipari.istat.it/digibib/Working_Papers/WP_60_2005_Boschi_Girardi.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Euro area inflation: long-run determinants and short-run dynamics (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isa:wpaper:60

Access Statistics for this paper

More papers in ISAE Working Papers from ISTAT - Italian National Institute of Statistics - (Rome, ITALY) Contact information at EDIRC.
Bibliographic data for series maintained by Stefania Rossetti ().