38 research outputs found
Driving Forces of Inflation in New EU Countries (in English)
No full textDriving forces of inflation in the eight new EU member states from Central and Eastern Europe are analyzed using the generalized dynamic-factor model (GDFM) developed by Forni et al. the impact of various macroeconomic variables on inflation is estimated by regressing the GDFM idiosyncratic component on these variables; the importance of second-round and indirect effects from energy shocks is assessed using a bivariate VAR. The author´s results suggest that, first, a significant part of inflation in the new members is driven by common factors, and, second, common component inflation is a better estimator of underlying inflation than a core inflation measure (i.e., headline inflation, excluding energy, food, alcohol, and tobacco).generalized dynamic-factor model, idiosyncratic components, inflation
The ECB's monetary analysis revisited
No full textMonetary aggregates continue to play an important role in the ECB's policy strategy. This paper revisits the case for money, surveying the ongoing theoretical and empirical debate. The key conclusion is that an exclusive focus on non-monetary factors alone may leave the ECB with an incomplete picture of the economy. However, treating monetary factors as a separate matter is a second-best solution. Instead, a general-equilibrium inspired analytical framework that merges the economic and monetary pillars of the ECB's policy strategy appears the most promising way forward. The role played by monetary aggregates in such unified framework may be rather limited. However, an integrated framework would facilitate the presentation of policy decisions by providing a clearer narrative of the relative role of money in the interaction with other economic and financial sector variables, including asset prices, and their impact on consumer prices. --ECB,monetary analysis,monetary pillar,New Keynesian model,DSGE model,P* model,Twopillar Phillips curve,VAR model,generalized dynamic factor model
A Comparative Analysis of the Czech Republic and Hungary: Using Small Continuous-Time Macroeconometric Models
No full textAbstract: In this paper we estimate a continuous-time macroeconometric model of the Hungarian economy and compare it with the Czech model described in Stavrev (1998). On the basis of the estimated models we provide simulations and compare the results between the two countries for i) anti-inflationary policy; ii) monetary and fiscal policies; iii) the effect of different wage indexation schemes; iv) the effect of nominal wage rigidities and v) the effect of price and nominal wage freeze.
A Comparative Analysis of the Czech Republic and Hungary. Using small Continuous-Time Macroeconometric Models
No full textIn this paper we estimate a continuous-time macroeconometric model of the Hungarian economy and compare it with the Czech model described in Stavrev (1998). On the basis of the estimated models we provide simulations and compare the results between the two countries for i) anti-inflationary policy; ii) monetary and fiscal policies; iii) the effect of different wage indexation schemes; iv) the effect of nominal wage rigidities and v) the effect of price and nominal wage freeze.Lucas critique, Policy simulations, Macroeconometric model, Anti-inflationary policy, Effectiveness of monetary and fiscal policies
What Explains Growth and Inflation Dispersions in EMU?
No full textThis paper’s analysis of growth and inflation dispersions in the euro area reveals several findings. First, these dispersions have declined appreciably since EMU. Second, the remaining dispersions are small but persistent, relating mainly to country-specific shocks, not differences in the transmission of common shocks. Third, the role of income convergence in explaining the dispersions has increased over time, while the role of price level convergence has declined. However, the increased role of income convergence should be viewed with caution, as it may reflect temporary rather than fundamental convergence factors, which may lead to growing macroeconomic imbalances.common and country-specific shocks, output and inflation dispersions, convergence
Transmission Channels, Risk Sharing, and EMU Dispersions
No full textFirst, using a small theoretically founded general equilibrium model fitted to the data by Bayesian techniques, the article assesses the contribution of interest rates and housing prices to dispersions within the European Monetary Union (EMU). It finds that the different behavior of interest rates just before and after the introduction of the euro has contributed significantly to growth dispersions in the EMU. However, this has been a one-off shock whose effects, particularly on construction, should decline over time. Second, the article analyzes the contribution of the financial system to sharing country-specific risks in a panel framework. It finds that further financial sector integration in the EMU could do much more to insure countries against shocks and increase consumption smoothing.consumption smoothing, output and inflation dispersions, risk sharing
Monetary and Fiscal Policies' Efficiency and the Determination of a Nominal Equilibrium Exchange Rate
No full textThe author of this paper constructs a continuous time macro-econometric model of the Czech economy. The model is assembled as a system of twelve non-linear differential equations. The model is put into use to determine the nominal equilibrium exchange rate of the Czech koruna in a macro-economic framework. The paper also investigates the effectiveness of monetary and fiscal policies in the presence of a fixed exchange-rate regime and massive capital inflows. The search for an equilibrium point is outlined and stability and sensitivity analyses are provided, along with in-sample static and dynamic predictions with the approximate discrete analogue.macro-econometric model; nominal equilibrium exchange rate; effectiveness of monetary and fiscal policies
A small continuous time macro-econometric model of the Czech Republic
No full textIn this paper we estimate a continuous time macro-econometric model of the Czech economy. The model is built as a system of twelve non-linear differential equations. We illustrate how the model can be used to determine the nominal equilibrium exchange rate of the Czech koruna in a macro-economic framework. The paper also investigates the effectiveness of monetary and fiscal policies in the presence of a fixed exchange rate regime and massive capital inflows. The search for an equilibrium path is outlined and stability and sensitivity analyses are provided, along with in-sample static and dynamic predictions with the approximate discrete analogue.macro-econometric model; nominal equilibrium exchange rate; effectiveness of monetary and fiscal policies.
Measures of Underlying Inflation in the Euro Area
No full textThe paper evaluates the 24-month ahead inflation forecasting performance of various indicators of underlying inflation and structural models. The inflation forecast errors resulting from model misspecification are larger than the errors resulting from forecasting of exogenous variables. Also, measures derived using the generalized dynamic factor model (GDFM) overperform other measures over the monetary policy horizon and are leading indicators of headline inflation. Trimmed means, although weaker than GDFM indicators, have good forecasting performance, while indicators by permanent exclusion underperform but provide useful information about short-term dynamics. The forecasting performance of theoretically-founded models that relate monetary aggregates, the output gap, and inflation improves with the time horizon but generally falls short of that of the GDFM. A composite measure of underlying inflation, derived by averaging the statistical indicators and the model-based estimates, improves forecast accuracy by eliminating bias and offers valuable insight about the distribution of risks.Economic models;inflation, monetary policy, monetary aggregates, inflation dynamics, central bank, money stock, inflation forecasts, monetary fund, inflationary pressures, price level, money demand, quantity theory of money, average inflation, inflation process, inflation targeting, inflationary pressure, national bank, quantity theory, monetary policy reaction function, inflation rate, lower inflation, theory of money, relative prices, price stability, monetary policy decision
