Modelling inflation in the Euro Area

Eilev Jansen

Working Paper Series from Department of Economics, Norwegian University of Science and Technology

Abstract: The paper presents an incomplete competition model (ICM), where inflation is determined jointly with unit labour cost growth. The ICM is estimated on data for the Euro area and evaluated against existing models, i.e. the implicit inflation equation of the Area Wide model (AWM) - cf. Fagan, Henry and Mestre (2001) - and estimated versions of the (single equation) P* model and a hybrid New Keynesian Phillips curve. The evidence from these comparisons does not invite decisive conclusions. There is, however, some support in favour of the (reduced form) AWM inflation equation. It is the only model that encompasses a general unrestricted model and it forecast encompasses the competitors when tested on 20 quarters of one step ahead forecasts.

Keywords: inflation; incomplete competition model; Area Wide model; P*-model; New Keynesian Phillips curve; model evaluation; forecast encompassing. (search for similar items in EconPapers)
JEL-codes: C22 C32 C52 C53 E31 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2004-03-01, Revised 2004-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published in ECB Working Paper Series earlier. This paper is a modified version.

Downloads: (external link)
http://www.svt.ntnu.no/iso/WP/2004/6euroinflationwpanomay04.pdf (application/pdf)

Related works:
Working Paper: Modelling inflation in the Euro Area (2004)
Working Paper: Modelling inflation in the euro area (2004)
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:nst:samfok:4104

Access Statistics for this paper

More papers in Working Paper Series from Department of Economics, Norwegian University of Science and Technology Contact information at EDIRC.
Bibliographic data for series maintained by Anne Larsen (econ@ok.ntnu.no).