June 2016 issue contents
Optimal inflation weights in the Euro Area

by Daniela Bragoli,^a Massimiliano Rigon^b and Francesco Zanetti^c

Abstract

This study investigates the appropriate measure for stabilizing inflation in the euro area. We use a model that accounts for both the heterogeneity observed in the degree of price rigidities across regions and sectors, and asymmetry of real disturbances in relative prices. Our work shows that the optimal weights to assign to each region or sector result from complex interactions between the degree of price stickiness, economic size, and the distribution of shocks within regions.

JEL Codes: E52, F41.

 
Full article (PDF, 27 pages, 305 kb)

^a Università Cattolica del Sacro Cuore 
^b Bank of Italy 
^c University of Oxford