English (United Kingdom)

https://curated-unify.zendy.io/wp-json/zendy-region/v1/featured_content/oa?rat=en

https://curated-unify.zendy.io/wp-json/zendy-region/v1/highlighted_journal/

Zendy Plus

Presents the access of premium content as premium feature

Premium Content

Presents the keyphrase highlighting as premium feature

Keyphrase Highlighting

Presents the summarisation as premium feature

Summarisation

Insights

Presents the pdf analysis as premium feature

PDF Analysis

Presents the zaia usage as premium feature

ZAIA

Zendy Tools

Zendy Open

This paper investigates the implications of cross-country heterogeneity within the euro area for the design of optimal monetary policy. We build an optimization-based multicoun- try model (MCM) describing the euro area in which differences between structural parameters across countries are allowed. Using Bayesian techniques, we estimate the MCM and its area- wide counterpart (AWM). We then question which model is the most appropriate for monetary policy purposes. Several results emerge. First, using an AWM induces relatively large and sig- nificant welfare losses. Second, this is not the use of a rule based on aggregated variables that is costly in terms of welfare, but rather the use of a suboptimal forecasting model. Third, allow- ing for habit on consumption has important implications for the dynamics of models, but taking into account differences in price indexation has more drastic effects on welfare losses.

Optimal Monetary Policy in an Estimated Dsge Model of the Euro Area with Cross-Country Heterogeneity