Fabio C. Bagliano
Dipartimento di Scienze Economiche e Finanziarie, Università di Torino

Roberto Golinelli
Dipartimento di Scienze Economiche, Università di Bologna

Claudio Morana
Dipartimento di Scienze Economiche e Metodi Quantitativi, Università del Piemonte Orientale

in: R. Beetsma, C. Favero, A. Missale, V.A. Muscatelli, P. Natale and P. Tirelli (eds.),
Monetary Policy, Fiscal Policies and Labour Markets.
Macroeconomic Policy Making in the EMU.
Cambridge University Press, 2004, pp. 399, ISBN: 0521823080

This paper was originally prepared for the EMU Macroeconomic Institutions Conference,
Università di Milano-Bicocca, 20-22 September 2001

Abstract

The aim of this paper is to provide econometric tools to analyse and forecast inflation dynamics in the Euro area, starting from a small-scale cointegrated VAR system. In order to supply information on the long-run inflation trend, a forward-looking "core'' inflation measure is constructed. This measure is based on long-run relations among major macroeconomic variables, bearing the interpretation of a long-run inflation forecast. The proposed measure may be particularly suitable for the "two-pillar'' monetary policy strategy of the ECB which focuses on medium-term inflation prospects.

J.E.L. classification numbers: C32, E31, E52
Keywords: core inflation, common trend, European Central Bank, monetary policy                          Download PDF (410 kb)