The economic consequences of Euro-area macro-modelling shortcuts

Journal article | Zeitschriftenartikel

Should euro-area economies be modelled in an aggregate (area-wide) fashion or in a disaggregate (multi-country) one? This paper tackles that question from both a statistical and an economic viewpoint. From a statistical viewpoint, aggregation bias criteria are found to signal that the degree of structural heterogeneity among euro-area economies is such that the loss of information entailed by an aggregate modelling approach may be far from trifling. From an economic viewpoint, we investigate the following issue: Are those statistically detectable heterogeneities of any practical relevance when it comes to supporting monetary policy decision-making? To provide an answer to this question, we compute simple optimal monetary policy reaction functions on the basis of either an aggregate model or a disaggregate one, and compare the associated welfare losses. The results suggest that the welfare under-performance of an area-wide-model-based rule is not only non negligible, but also robust with respect to a number of sensitivity analyses.

Object Details

• Extent: Seite(n): 2399-2415
• Language: Englisch
• Notes: Status: Postprint; begutachtet (peer reviewed)

References and Relationships

• Bibliographic citation: Applied Economics, 42(19)

Classification and Topics

• Subject: Wirtschaft ; Politikwissenschaft ; Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik ; Europapolitik ; Wirtschaftspolitik ; Geldpolitik ; Aggregation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Monteforte, Libero ; Siviero, Stefano
• Event: Veröffentlichung
• (where): Vereinigte Staaten von Amerika
• (when): 2008

Further information

• DOI: https://doi.org/10.1080/00036840701858075
• URN: urn:nbn:de:0168-ssoar-242456
• Rights: GESIS - Leibniz-Institut für Sozialwissenschaften. Bibliothek Köln
• Last update: 21.06.2024, 4:27 PM CEST