Inflation Target Shocks and Monetary Policy Inertia in the Euro Area
Bibliographic Data
| ID | 9718399 |
|---|---|
| Authors | Patrick Fève (0009-0006-4064-7775, Toulouse School of Economics), Julien Matheron (Banque de France, DGEI–DEMS–SEPS and SDFi (University of Paris–Dauphine)), Jean‐Guillaume Sahuc (Banque de France) |
| Year | 2010 |
| Volume | 120 |
| Issue | 547 |
| Pages | 1100-1124 |
| Publication date | 2010-09-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/j.1468-0297.2009.02332.x |
| OpenAlex | W1582605777 |
| Language | EN |
| Citations received | 1 |
| References cited | 30 |
The euro area as a whole has experienced a marked downward trend in inflation over the past decades and, concomitantly, a protracted period of depressed activity. Can permanent shifts in monetary policy be held responsible for these dynamics? To answer this question, we embed serially correlated changes in the inflation target into a DSGE model with real and nominal fric-tions. The formal Bayesian estimation of the model suggests that gradual changes in the inflation target have played a major role in the euro area business cycle. Following an inflation target shock, the real interest rate increases sharply and persistently, leading to a protracted decline in economic activity. Counter–factual exercises show that, had monetary policy implemented its new inflation objective at a faster rate, the euro zone would have experienced more sustained growth than it actually did
Economic history · Economics · Inertia · Inflation (cosmology · Keynesian economics · Monetary policy · Economic Theory and Policy · Global Financial Crisis and Policies · History · Monetary Policy and Economic Impact
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| Unique citing works | 1 |
|---|---|
| Citations per year | 0,06 |
| Citation span | 2009 - 2009 (1) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 1 |