Inflation Modelling in the Euro Area
University of Turin, Department of Economics and Public Finance WP No. 62
Posted: 5 Jul 2002
Date Written: March 2002
Abstract
The aim of this paper is to provide econometric tools to analyse and forecast inflation dynamics in the Euro area, starting from a small-scale cointegrated VAR system. In order to supply information on the long-run inflation trend, a forward-looking "core" inflation measure is constructed. This measure is based on long-run relations among major macroeconomic variables, bearing the interpretation of a long-run inflation forecast. The proposed measure may be particularly suitable for the "two-pillar" monetary policy strategy of the ECB which focuses on medium-term inflation prospects.
JEL Classification: C32, E31, E52
Suggested Citation: Suggested Citation
Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )
Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy