Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152822
Authors: 
Angeloni, Ignazio
Ehrmann, Michael
Year of Publication: 
2004
Series/Report no.: 
ECB Working Paper 388
Abstract: 
We build a stylised 12-country model of the euro area and use it to analyse why differences in national inflation and growth rates arise within the European monetary union. We find that inflation persistence is a key potential explanatory factor. Other more frequently mentioned reasons, like country-specific shocks or differences in the monetary transmission mechanism across countries, count less. We also look at how a monetary policy geared to area-wide average inflation affects these differentials. Our model suggests that area-wide inflation stability and low inflation differentials are complementary.
Subjects: 
Currency union
euro area
inflation differentials
Inflation persistence
JEL: 
E31
E32
E52
F42
Document Type: 
Working Paper

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