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Author(s): Álvaro Aguiar
Manuel Mota Freitas Martins
Title: Macroeconomic Volatility Trade-off and Monetary Policy Regime in the Euro Area (FEP Working Paper Nº 123, Faculdade de Economia da Universidade do Porto o, Março 2003)
Issue Date: 2003
Abstract: 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 monetaryauthority, 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.
Subject: Economia, Economia e gestão
Economics, Economics and Business
Scientific areas: Ciências sociais::Economia e gestão
Social sciences::Economics and Business
Document Type: Trabalho Académico
Rights: openAccess
Appears in Collections:FEP - Trabalho Académico

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