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Financial Frictions and Inflation Differentials in a Monetary Union
Author(s) -
Hristov Nikolay,
Hülsewig Oliver,
Wollmershäuser Timo
Publication year - 2014
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12034
Subject(s) - stylized fact , economics , dynamic stochastic general equilibrium , monetary policy , inflation (cosmology) , monetary economics , debt , bond market , currency union , macroeconomics , physics , theoretical physics
This paper presents a stylized N ew K eynesian dynamic stochastic general equilibrium ( DSGE ) model for a monetary union to analyze whether cyclical inflation differentials can be explained by cross‐country differences concerning the characteristics of financial markets. Our results suggest that empirically plausible degrees of heterogeneity with respect to two important credit market characteristics, i.e. the access to credit and the fraction of households holding debt, are a relevant source of inflation dispersion across E uropean M onetary U nion ( EMU ) member countries.