This paper reviews various approaches to the measurement of core inflation that have been proposed in recent years. The objective is to determine whether the ECB should pay special attention to one or other of these measures in assessing inflation developments in the euro area. I put particular...

We study optimal monetary policy design in a simple model that deviates from the linear-quadratic paradigm and provides a rationale for the practice of inflation zone targeting. We show that the presence of either zone-quadratic preferences or a zone-linear relationship between inflation and...

This paper provides closed-form formulae for computing the asymptotic standard errors of the estimated autocovariance and autocorrelation functions for stable VAR models by means of the d-method. These standard errors can be used to construct asymptotic confidence bands for the estimated...

The paper focuses on the measurement of the NAIRU (Non-Accelerating-Inflation-Rate-of-Unemployment) for the euro area and assesses the usefulness of different methodologies developed in the literature to estimate this unobservable variable at the aggregate level. After reviewing the theoretical...

In this paper we estimate a small model of the euro area to be used as a laboratory for evaluating the performance of alternative monetary policy strategies. We focus on the relationship between output and inflation and investigate the fit of the nominal wage contracting model due to Taylor...

We propose a measure of core inflation which is derived from a Markov switching ARFIMA model. The Markov switching ARFIMA model generalises the standard ARFIMA model allowing mean reversion to take place with respect to a changing unconditional mean. By imposing a coswitching restriction for...

Tax collection costs have been advocated in the literature as a reason to deviate from the Friedman rule, in standard general equilibrium monetary models with flexible prices. This paper shows that there are conditions under which the Friedman rule is optimal despite the presence of collection...

We examine two measures of core inflation which have been proposed in recent years: the limited-influence estimators of core inflation pioneered by Bryan and Cecchetti (1994); and the Edgeworth or variance-weighted price index discussed by Diewert (1995). We compare these measures with...

This paper uses a small, calibrated forward-looking model of the euro-area economy to investigate the implications of incomplete information about potential output for the conduct and the design of monetary policy. Three sets of issues are examined. First, the certainty-equivalent optimal policy...

Diffusion indexes based on dynamic factors have recently been advocated by Stock and Watson (1998), and further used to perform forecasting tests by the same authors on US data. This technique is explored for the euro area using a multi-country data set and a broad array of variables, in order...