Is there a trade-off between inflation variability and output-gap variability in the EMU countries?
This paper examines two issues. First, we compare, based on the ratio of output-gap variability to inflation variability, the monetary policy performance of eleven EMU countries for the whole period of the EMS. Second, we examine whether the introduction of an implicit inflation-targeting by the EMU member countries after the Maastricht Treaty changed the trade-off between inflation variability and output-gap variability. We employ a stochastic volatility model for the whole period of the EMS and for two sub-periods (i.e., before and after the Maastricht Treaty). We find that for the whole period the trade-off ratio varies among EMU countries, especially in the case where industrial production is utilized to construct the output-gap variable. The results also vary from the point of view of how the trade-off variabilities change for each country before and after the Maastricht Treaty. The implication of these findings is that asymmetries exist in the euro area as a result of either different monetary policy preferences or different economic structures among the EMU's member countries.
Year of publication: |
2002
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Authors: | Arestis, Philip ; Mouratidis, Kostas |
Publisher: |
Annandale-on-Hudson, NY : Levy Economics Institute of Bard College |
Saved in:
freely available
Series: | Working Paper ; 359 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 503946168 [GVK] hdl:10419/31649 [Handle] |
Source: |
Persistent link: https://www.econbiz.de/10010266592
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