Inflation Persistence in Structural Macroeconomic Models (Rg10)

40 Pages Posted: 21 Sep 2005

See all articles by Robert-Paul Berben

Robert-Paul Berben

De Nederlandsche Bank - Monetary and Economic Policy Department

Ricardo Mestre

European Central Bank (ECB)

Theodore Mitrakos

Bank of Greece; Athens University of Economics and Business

Julian Benedict Morgan

European Central Bank (ECB)

Nicholas Zonzilos

Bank of Greece

Date Written: September 2005

Abstract

This paper analyses the response of inflation in the euro area to five macroeconomic shocks through the use of results derived from Eurosystem large-scale macroeconomic models. The main finding is that only a fiscal shock, and to a lesser extent a TFP shock, generate marked inflation persistence. In contrast, an indirect tax and an oil price shock appear much less persistent and a social security shock generates less inflation persistence in the majority of the countries (although some weak persistence was observed at the euro area level). The paper also considers evidence on the sources of persistence, which indicates that it is crucially affected by the responsiveness of wages to employment, by the sluggishness in the adjustments of the demand components, and by the speed of adjustment of employment to output and wage changes.

Keywords: Inflation persistence, large-scale macroeconomic models, impulse response function

JEL Classification: C53, E31, E52

Suggested Citation

Berben, Robert-Paul and Mestre, Ricardo and Mitrakos, Theodore M. and Morgan, Julian Benedict and Zonzilos, Nicholas, Inflation Persistence in Structural Macroeconomic Models (Rg10) (September 2005). ECB Working Paper No. 521, Available at SSRN: https://ssrn.com/abstract=783826

Robert-Paul Berben (Contact Author)

De Nederlandsche Bank - Monetary and Economic Policy Department ( email )

Westeinde 1
P.O. Box 98
1017 ZN Amsterdam
Netherlands

Ricardo Mestre

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0049 69 1344 6000 (Fax)

Theodore M. Mitrakos

Bank of Greece ( email )

21 E. Venizelos Avenue
GR-10250 Athens
Greece

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

Julian Benedict Morgan

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0049 69 1344 6000 (Fax)

Nicholas Zonzilos

Bank of Greece ( email )

21 E. Venizelos Avenue
GR-10250 Athens
Greece

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