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Optimal Inflation Weights in the Euro Area

Author

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  • Daniela Bragoli

    (Università Cattolica)

  • Massimiliano Rigon

    (Bank of Italy)

  • Francesco Zanetti

    (University of Oxford)

Abstract

This study investigates the appropriate measure for stabilizing inflation in the Euro Area. We use a model that accounts for both the heterogeneity observed in the degree of price rigidities across regions and sectors, and asymmetry of real disturbances in relative prices. Our work shows that the optimal weights to assign to each region or sector result from complex interactions between the degree of price stickiness, economic size and the distribution of shocks within regions.

Suggested Citation

  • Daniela Bragoli & Massimiliano Rigon & Francesco Zanetti, 2015. "Optimal Inflation Weights in the Euro Area," BCAM Working Papers 1503, Birkbeck Centre for Applied Macroeconomics.
    • Handle: RePEc:bbk:bbkcam:1503
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    References listed on IDEAS

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    Cited by:

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    2. Massimiliano Rigon & Francesco Zanetti, 2018. "Optimal Monetary Policy and Fiscal Policy Interaction in a Non-Ricardian Economy," International Journal of Central Banking, International Journal of Central Banking, vol. 14(3), pages 389-436, June.
    3. Gelfer, Sacha, 2024. "Examining business cycles and optimal monetary policy in a regional DSGE model," Economic Modelling, Elsevier, vol. 136(C).
    4. Irina Kozlovtceva & Alexey Ponomarenko & Andrey Sinyakov & Stas Tatarintsev, 2019. "Financial Stability Implications of Policy Mix in a Small Open Commodity-Exporting Economy," Bank of Russia Working Paper Series wps42, Bank of Russia.
    5. Santoro, Sergio & Weber, Henning, 2023. "Micro price heterogeneity and optimal inflation," Occasional Paper Series 322, European Central Bank.

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    More about this item

    Keywords

    Optimal monetary policy; Euro Area regions; asymmetric shocks; asymmetric price stickiness.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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