Modelling Inflation in the Euro Area

Arbeitspapier

The paper presents an incomplete competition model (ICM), where inflation is determined jointly with unit labour cost growth. The ICM is estimated on data for the Euro area and evaluated against existing models, i.e. the implicit inflation equation of the Area Wide model (AWM) - cf. Fagan, Henry and Mestre (2001) - and estimated versions of the (single equation) P* model and a hybrid New Keynesian Phillips curve. The evidence from these comparisons does not invite decisive conclusions. There is, however, some support in favour of the (reduced form) AWM inflation equation. It is the only model that encompasses a general unrestricted model and it forecast encompasses the competitors when tested on 20 quarters of one step ahead forecasts.

Object Details

• ISBN: 82-7553-250-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2004/10

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Model Evaluation, Validation, and Selection ; Forecasting Models; Simulation Methods ; Price Level; Inflation; Deflation
• Subject: Area Wide model ; P*-model ; New Keynesian Phillips curve ; inflation ; incomplete competition model ; model evaluation ; forecast encompassing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jansen, Eilev S.
• Event: Veröffentlichung
• (who): Norges Bank
• (where): Oslo
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/209835
• Last update: 10.03.2025, 11:43 AM CET