Inflation and Inflation Uncertainty in the Euro Area



Overall, these results give support to the view expressed by the President of the ECB,
Jean-Claude Trichet, a few years ago, when he argued that the single monetary policy
and its clear focus on long-run price stability had helped anchor medium- to long-run
inflation expectations in the Euro area, thus reducing inflation uncertainty (Trichet
2004). Short-run inflation uncertainty might have risen since 1999, but this does not
appear to reflect higher structural uncertainty associated with unanticipated monetary
policy changes, but possibly remaining differences across member states, fiscal
policy, and financial and commodity market price shocks.

This analysis can be extended in several directions. First, the regression model for the
inflation process can be expanded to include other possible determinants such as
industrial production, money growth, the yield curve, the exchange rate and credit.
Second, whether the observed patterns can indeed be attributed to the role played by
the ECB can be tested by comparing our findings with those obtained for a control
group of countries, such as other European countries outside the Eurozone, the US,
and Canada. Third, estimation of a time-varying VAR-GARCH model could be
carried out instead of treating unemployment and other possible variables as
exogenous. Fourth, the forecasting properties of the model could be investigated.

16



More intriguing information

1. Imperfect competition and congestion in the City
2. The name is absent
3. The name is absent
4. Before and After the Hartz Reforms: The Performance of Active Labour Market Policy in Germany
5. The name is absent
6. Evaluating the Impact of Health Programmes
7. Subduing High Inflation in Romania. How to Better Monetary and Exchange Rate Mechanisms?
8. Initial Public Offerings and Venture Capital in Germany
9. The Triangular Relationship between the Commission, NRAs and National Courts Revisited
10. The name is absent
11. Examining Variations of Prominent Features in Genre Classification
12. School Effectiveness in Developing Countries - A Summary of the Research Evidence
13. The ultimate determinants of central bank independence
14. The name is absent
15. The name is absent
16. The Interest Rate-Exchange Rate Link in the Mexican Float
17. The name is absent
18. QUEST II. A Multi-Country Business Cycle and Growth Model
19. Migrating Football Players, Transfer Fees and Migration Controls
20. Modelling Transport in an Interregional General Equilibrium Model with Externalities