Inflation and Growth in the Euro Zone
Dino Martellato
No 2006_52, Working Papers from Department of Economics, University of Venice "Ca' Foscari"
Abstract:
Although euro area-wide inflation was from 1999 to 2005 almost right, i.e. �close to balance, but below 2%�, and although it combined with real growth as predicted by the long-run money demand equation in the euro area, the picture that emerges at country level is more scattered. Inside a monetary union, inflation divergences could be destabilizing and an excessive dispersion could be a problem, thus the scattered performance of the single members in terms of HICP inflation and real growth is an issue that the euro area governance is illprepared to manage. It may be of interest, therefore, to understand whether observed differences come from the money market or from the costs side or from the interaction between supply and demand when agents are forward looking. The paper sets out to ascertain whether the patterns of inflation and growth data observed in the twelve members and Slovenia compare to what is predicted by the long-run money demand equation in the euro area, the Balassa-Samuelson construct or the New Keynesian model.
Keywords: Inflation; stability; euro zone (search for similar items in EconPapers)
JEL-codes: E12 E41 E52 E63 (search for similar items in EconPapers)
Pages: 20
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2006_52
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