English, Article, Journal or magazine article edition: Macroeconomic Volatility Trade-off and Monetary Policy Regime in the Euro Area Alvaro Aguiar; Manuel M. F. Martins

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Bookmark: http://trove.nla.gov.au/version/182575
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Macroeconomic Volatility Trade-off and Monetary Policy Regime in the Euro Area
Author
  • Alvaro Aguiar
  • Manuel M. F. Martins
Physical Description
  • preprint
Notes
  • This research uncovers a well-defined monetary policy regime starting in 1986 in the aggregate Euro Area. Both alternative solution-estimation methods employed - optimal control cum GMM, and dynamic programming cum FIML - identify a regime of strict inflation targeting with interest rate smoothing. The unemployment gap, properly estimated as quasi real-time information, is a relevant element in the information set of the monetary authority, despite not being included in its preferences. The emergence of the regime relates to the improvement of the volatility trade-off between inflation and unemployment gap since the mid-80s. Additional improving factors have been milder supply shocks and better ability of policymakers to set the interest rate closer to optimum.
  • Monetary Policy Regime, Euro Area, Optimal Control, Dynamic Programming, GMM, FIML.
  • RePEc:por:fepwps:123
Language
  • English
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