IDEAS home Printed from https://ideas.repec.org/p/bfr/banfra/247.html
   My bibliography  Save this paper

Désinflation et chômage dans la zone euro : une analyse à l'aide d'un modèle VAR structurel

Author

Listed:
  • Fève, P.
  • Matheron, J.
  • Sahuc, J-G.

Abstract

The present paper investigates the dynamic effects of disinflation shocks for a number of real macroeconomic variables in the euro area. Using structural VARs, we identify disinflation shocks as the only shocks that can exert a long--run effect on inflation as well as other nominal variables cointegrating with inflation. These shocks are found to generate large recessionary effects, notably when it comes to investment, and triggers a persistent rise in unemployment and in the real interest rate. The analysis is complemented by computing inefficiency measures on goods and labor markets. We show that, after a disinflation shock, inefficiencies in the labor market seem to prevail. These conclusions are robust to modifications of our baseline identification scheme.

Suggested Citation

  • Fève, P. & Matheron, J. & Sahuc, J-G., 2009. "Désinflation et chômage dans la zone euro : une analyse à l'aide d'un modèle VAR structurel," Working papers 247, Banque de France.
    • Handle: RePEc:bfr:banfra:247
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_247_2009.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    2. Frank Smets & Raf Wouters, 2005. "Comparing shocks and frictions in US and euro area business cycles: a Bayesian DSGE Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 161-183.
    3. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters, in: Monetary Policy, pages 155-193, National Bureau of Economic Research, Inc.
    4. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90, National Bureau of Economic Research, Inc.
    5. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    6. Rudebusch, Glenn D, 1998. "Do Measures of Monetary Policy in a VAR Make Sense?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 907-931, November.
    7. Peter N. Ireland, 2007. "Changes in the Federal Reserve's Inflation Target: Causes and Consequences," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 1851-1882, December.
    8. Jordi Galí & Mark Gertler & J. David López-Salido, 2007. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 44-59, November.
    9. Bomfim, Antulio N & Rudebusch, Glenn D, 2000. "Opportunistic and Deliberate Disinflation under Imperfect Credibility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 707-721, November.
    10. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, February.
    11. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148, Elsevier.
    12. Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, May.
    13. G. Coenen & J.-L. Vega, 2001. "The demand for M3 in the euro area," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(6), pages 727-748.
    14. Watson, Mark W, 1994. "Business-Cycle Durations and Postwar Stabilization of the U.S. Economy," American Economic Review, American Economic Association, vol. 84(1), pages 24-46, March.
    15. Yongsung Chang & Taeyoung Doh & Frank Schorfheide, 2007. "Non‐stationary Hours in a DSGE Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(6), pages 1357-1373, September.
    16. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
    17. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 91, European Central Bank.
    18. Rudebusch, Glenn D, 1998. "Do Measures of Monetary Policy in a VAR Make Sense? A Reply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 943-948, November.
    19. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 121-184, National Bureau of Economic Research, Inc.
    20. Sims, Christopher A, 1998. "Comment on Glenn Rudebusch's "Do Measures of Monetary Policy in a VAR Make Sense?"," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 933-941, November.
    21. Athanasios Orphanides & David W. Wilcox, 2002. "The Opportunistic Approach to Disinflation," International Finance, Wiley Blackwell, vol. 5(1), pages 47-71.
    22. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    23. Jordi Galí & Mark Gertler & J. David López-Salido, 2003. "The euro area inefficiency gap," Working Papers 0302, Banco de España.
    24. Gregory de Walque & Frank Smets & Rafael Wouters, 2006. "Firm-Specific Production Factors in a DSGE Model with Taylor Price Setting," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
    25. Fagan, Gabriel & Henry, Jerome & Mestre, Ricardo, 2005. "An area-wide model for the euro area," Economic Modelling, Elsevier, vol. 22(1), pages 39-59, January.
    26. Bullard, James & Keating, John W., 1995. "The long-run relationship between inflation and output in postwar economies," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 477-496, December.
    27. Jean-Pierre Cling & François Meunier, 1986. "La désinflation en France : le point de vue de l'économètre," Revue Économique, Programme National Persée, vol. 37(6), pages 1093-1125.
    28. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
    29. George T. McCandless & Warren E. Weber, 1995. "Some monetary facts," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 19(Sum), pages 2-11.
    30. John F. Henry & L. Randall Wray, 1998. "Economic Time," Macroeconomics 9811004, University Library of Munich, Germany.
    31. Javier Andrés & Ignacio Hernando, 1999. "Does Inflation Harm Economic Growth? Evidence from the OECD," NBER Chapters, in: The Costs and Benefits of Price Stability, pages 315-348, National Bureau of Economic Research, Inc.
    32. Romer, Christina D. & Romer, David H., 1994. "Monetary policy matters," Journal of Monetary Economics, Elsevier, vol. 34(1), pages 75-88, August.
    33. Martin Feldstein, 1999. "The Costs and Benefits of Price Stability," NBER Books, National Bureau of Economic Research, Inc, number feld99-1.
    34. Javier Andrés & Ignacio Hernando & David López-Salido, 1998. "The Long-Run Effect of Permanent Disinflations," Working Papers 9825, Banco de España.
    35. Vlaar, Peter J. G., 2004. "Shocking the eurozone," European Economic Review, Elsevier, vol. 48(1), pages 109-131, February.
    36. W. Wascher & Palle S. Andersen, 1999. "Sacrifice ratios and the conduct of monetary policy in conditions of low inflation," BIS Working Papers 82, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Patrick F»Ve & Julien Matheron & Jean-Guillaume Sahuc, 2010. "Disinflation Shocks in the Eurozone: A DSGE Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2-3), pages 289-323, March.
    2. Patrick Fève & Julien Matheron & Jean-Guillaume Sahuc, 2010. "Inflation Target Shocks and Monetary Policy Inertia in the Euro Area," Economic Journal, Royal Economic Society, vol. 120(547), pages 1100-1124, September.
    3. Charles L. Evans & Kenneth N. Kuttner, 1998. "Can VAR's describe monetary policy?," Working Paper Series WP-98-19, Federal Reserve Bank of Chicago.
    4. Gbaguidi, David, 2012. "La courbe de Phillips : temps d’arbitrage et/ou arbitrage de temps," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(1), pages 87-119, mars.
    5. Collard, Fabrice & Fève, Patrick & Matheron, Julien, 2007. "The Dynamic Effects of Disinflation Policies," IDEI Working Papers 426, Institut d'Économie Industrielle (IDEI), Toulouse.
    6. Marika Karanassou & Hector Sala & Dennis J. Snower, 2010. "Phillips Curves And Unemployment Dynamics: A Critique And A Holistic Perspective," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 1-51, February.
    7. Nicoletta Batini, 2006. "Euro area inflation persistence," Empirical Economics, Springer, vol. 31(4), pages 977-1002, November.
    8. Sun, Rongrong, 2014. "Review over Empirical Evidence on Real Effects of Monetary Policy," MPRA Paper 58513, University Library of Munich, Germany.
    9. Nikolaus A. Siegfried, 2002. "An information-theoretic extension to structural VAR modelling," Quantitative Macroeconomics Working Papers 20203, Hamburg University, Department of Economics.
    10. Ramey, V.A., 2016. "Macroeconomic Shocks and Their Propagation," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 71-162, Elsevier.
    11. Sterken, Elmer, 2003. "Monetary transmission, asset prices, and the business cycle indicator in Germany," CCSO Working Papers 200315, University of Groningen, CCSO Centre for Economic Research.
    12. Croushore, Dean & Evans, Charles L., 2006. "Data revisions and the identification of monetary policy shocks," Journal of Monetary Economics, Elsevier, vol. 53(6), pages 1135-1160, September.
    13. Carlo A. Favero, 2009. "The Econometrics of Monetary Policy: An Overview," Palgrave Macmillan Books, in: Terence C. Mills & Kerry Patterson (ed.), Palgrave Handbook of Econometrics, chapter 16, pages 821-850, Palgrave Macmillan.
    14. Jean-Guillaume Sahuc & Julien Matheron & Patrick Fève, 2009. "Une estimation de la cible implicite d’inflation dans la zone euro," Revue Française d'Économie, Programme National Persée, vol. 24(2), pages 39-56.
    15. Stefan Schiman-Vukan & Harald Badinger, 2020. "Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates," WIFO Working Papers 608, WIFO.
    16. Kirstin Hubrich & Peter Vlaar, 2004. "Monetary transmission in Germany: Lessons for the Euro area," Empirical Economics, Springer, vol. 29(2), pages 383-414, May.
    17. Wieland, Volker & Wolters, Maik, 2013. "Forecasting and Policy Making," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 239-325, Elsevier.
    18. repec:ner:maastr:urn:nbn:nl:ui:27-19768 is not listed on IDEAS
    19. Ashesh Rambachan & Neil Shephard, 2019. "Econometric analysis of potential outcomes time series: instruments, shocks, linearity and the causal response function," Papers 1903.01637, arXiv.org, revised Feb 2020.
    20. Stock, J.H. & Watson, M.W., 2016. "Dynamic Factor Models, Factor-Augmented Vector Autoregressions, and Structural Vector Autoregressions in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 415-525, Elsevier.
    21. Giuseppe De Arcangelis & Giorgio Di Giorgio, 1999. "Monetary policy shocks and transmission in Italy: A VAR analysis," Economics Working Papers 446, Department of Economics and Business, Universitat Pompeu Fabra.

    More about this item

    Keywords

    SVAR; long-run restrictions; disinflation.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:247. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael brassart (email available below). General contact details of provider: https://edirc.repec.org/data/bdfgvfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.