{"title":"Monetary policy in the euro area: Active or passive?","authors":"Alice Albonico , Guido Ascari , Qazi Haque","doi":"10.1016/j.euroecorev.2025.105050","DOIUrl":null,"url":null,"abstract":"<div><div>We estimate a medium-scale DSGE model for the euro area from the introduction of the euro to mid-2023, testing for indeterminacy in monetary policy. While the indeterminacy model occasionally fits the data better, this result is fragile and sensitive to technical assumptions, particularly the correlation between sunspot and fundamental shocks. Additionally, inflation responses under indeterminacy contradict standard economic theory and empirical evidence. In contrast, the determinacy model aligns with both theory and empirical data, particularly in response to monetary policy shocks. Our findings support the view that monetary policy in the euro area has been sufficiently active to stabilize inflation and prevent self-fulfilling inflationary expectations.</div></div>","PeriodicalId":48389,"journal":{"name":"European Economic Review","volume":"177 ","pages":"Article 105050"},"PeriodicalIF":2.8000,"publicationDate":"2025-05-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"European Economic Review","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S001429212500100X","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
We estimate a medium-scale DSGE model for the euro area from the introduction of the euro to mid-2023, testing for indeterminacy in monetary policy. While the indeterminacy model occasionally fits the data better, this result is fragile and sensitive to technical assumptions, particularly the correlation between sunspot and fundamental shocks. Additionally, inflation responses under indeterminacy contradict standard economic theory and empirical evidence. In contrast, the determinacy model aligns with both theory and empirical data, particularly in response to monetary policy shocks. Our findings support the view that monetary policy in the euro area has been sufficiently active to stabilize inflation and prevent self-fulfilling inflationary expectations.
期刊介绍:
The European Economic Review (EER) started publishing in 1969 as the first research journal specifically aiming to contribute to the development and application of economics as a science in Europe. As a broad-based professional and international journal, the EER welcomes submissions of applied and theoretical research papers in all fields of economics. The aim of the EER is to contribute to the development of the science of economics and its applications, as well as to improve communication between academic researchers, teachers and policy makers across the European continent and beyond.