Article ID Journal Published Year Pages File Type
5067311 European Economic Review 2008 23 Pages PDF
Abstract
Several authors have recently interpreted the European Central Bank's (ECB's) two-pillar framework as separate approaches to forecast and analyse inflation at different time horizons or frequency bands. The ECB has publicly supported this understanding of the framework. This paper presents further evidence on the behaviour of euro area inflation using band spectrum regressions, which allow for a natural definition of the short and long run in terms of specific frequency bands, and causality tests in the frequency domain. The main finding is that variations in inflation are well explained by low-frequency movements of money and real output growth and high-frequency fluctuations of the output gap.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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