The Minimum Inflation Rate for Euroland

Hans-Werner Sinn and Michael Reutter

No 8085, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: As a result of the Balassa effect relative prices change rapidly between and within the euro countries. Thus it is impossible to find a common monetary policy that will result in price stability in all countries. Based on empirical estimates of the Balassa model, the paper calculates a minimum aggregate inflation rate which is compatible with the requirement that no country face a deflation. This minimum aggeragate inflation rate is 0.94% in the euro-11 countries and 1.13% in an extended Europe which incorporates the east European countries.

JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2001-01
Note: ME
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Citations: View citations in EconPapers (82)

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Working Paper: The Minimum Inflation Rate for Euroland (2000)
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