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EMU and the Anchoring of Inflation Expectations

Author

Listed:
  • Mayes, David G.

    (Department of Accounting and Finance, University of Auckland, New Zealand)

  • Paloviita, Maritta

    (Bank of Finland, Helsinki)

  • Virén, Matti

    (Bank of Finland, Helsinki and University of Turku, Finland)

Abstract

This paper provides a new way of assessing the credibility of monetary policy by analyzing the dispersion of inflation-unemployment observations over time, which is both simple and free from ambiguities related to the choice of the Phillips curve specification and modelling of inflation expectations. The analysis uses data from eleven EMU countries and nine non-EMU countries for 1984-1998 and 1999-2013. The dispersion measures use alternative weights for inflation and unemployment and also a simple Misery index. We find that dispersion has decreased during the EMU period but this just mirrors experience in the OECD over the same period. L’Unione Monetaria Europea e l’ancoraggio delle aspettative di inflazione Questo studio presenta un nuovo metodo per la valutazione della credibilità di una politica monetaria, attraverso l’analisi della dispersione delle osservazioni sul rapporto inflazione-disoccupazione. Questo nuovo metodo è semplice e privo di ambiguità relative alla scelta delle specificazioni della curva di Phillips e dei modelli delle aspettative di inflazione. L’analisi si basa su dati relativi a undici paesi UEM e a nove paesi non-UEM per i periodi 1984-1998 e 1999-2013. Le misure di dispersione usano misure alternative per inflazione e disoccupazione e anche un Indice Misery semplice. I risultati indicano che la dispersione è diminuita durante il periodo UEM, ma questo non è che un riflesso di esperienze simili nell’area OCSE nello stesso periodo.

Suggested Citation

  • Mayes, David G. & Paloviita, Maritta & Virén, Matti, 2016. "EMU and the Anchoring of Inflation Expectations," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 69(4), pages 341-364.
    • Handle: RePEc:ris:ecoint:0784
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    References listed on IDEAS

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    More about this item

    Keywords

    Misery Index; Inflation; Unemployment; Phillips Curve;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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