Time-varying exchange rate pass-through effects to domestic prices under fixed euro exchange rate perspective represent one of the most challenging implications of the common currency. The problem is even more crucial when examining crisis related redistributive effects associated with relative...

This paper analyzes the relationship between commodity prices and consumer food prices in the euro area and in its largest economies (Germany, France and Italy) and tests whether the latter respond asymmetrically to shocks to the former. The issue is of particular interest for those monetary...

We construct a Bayesian vector autoregressive model with three layers of information: the key drivers of inflation, cross-country dynamic interactions, and country-specific variables. The model provides good forecasting accuracy with respect to the popular benchmarks used in the literature. We...

For the last two years inflation has been systematically falling across countries in the European Union and lately it exhibits rising deflationary pressures. Recent studies suggest that apart from global determinants influencing broad inflation measures, e.g. plummeting commodity prices, core...

Assessing the magnitude of the output gap is critical to achieving an optimal policy mix. Unfortunately, the gap is an unobservable variable, which, in practice, has been estimated in a variety of ways, depending on the preferences of the modeler. This model selection problem leads to a...

The paper presents an incomplete competition model (ICM), where inflation is determined jointly with unit labour cost growth. The ICM is estimated on data for the Euro area and evaluated against existing models, i.e. the implicit inflation equation of the Area Wide model (AWM) - cf. Fagan, Henry...

Monitoring and forecasting price developments in the euro area is essential in the light of the second pillar of the ECB's monetary policy strategy. This study analyses whether the forecasting accuracy of forecasting aggregate euro area inflation can be improved by aggregating forecasts of...

The period of extraordinary volatility in euro area headline inflation starting in 2007 raised the question whether forecast combination methods can be used to hedge against bad forecast performance of single models during such periods and provide more robust forecasts. We investigate this issue...

This paper develops Area-wide Leading Inflation CyclE (ALICE) indicators for euro area headline and core inflation with an aim to provide early signals about turning points in the respective inflation cycle. The series included in the two composite leading indicators are carefully selected from...

Using a small Bayesian dynamic factor model of the euro area we estimate the deviations of output from its trend that are consistent with the behavior of inflation. We label these deviations the output gap. In order to pin-down the features of the model, we evaluate the accuracy of real-time...