Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Galí and Monacelli (2005). We obtain a testable specification where fluctuations in the terms of trade enter explicitly, thus allowing a comparison of the relevance of domestic versus external determinants of CPI inflation dynamics. For most countries in our sample the expected relative change in the terms of trade emerges as a more relevant inflation driver than the contemporaneous domestic output gap. Overall, our results indicate some, albeit moderate, support for the tested relationship based on data from ten OECD countries typically classified as open economies. Terms of use: Documents in

In a nutshell, if people trust the ECB, then its legitimacy as a supranational institution and the credibility of its monetary policy will be higher. 2 It can furthermore be argued that trust in the ECB and support for its policy could be enhanced by active communication (explaining its objectives, constraints, instruments and effects) with the European polities. A clear and transparent communication strategy is even needed more if the population's support for a central bank's policy declines, as it seems to be the case post-GFC, and not just in the Euro area. But, as Blinder et al. (2008) show, no consensus has shaped out on an optimal communication strategy of a central bank.Although some papers have attempted to check how ECB's communication is received by the markets, very few have been able to ascertain the width of the support for the ECB in the European population at large. It can certainly be affirmed that monetary policy impacts everyone's everyday life. Starting from such a premise, the study of attitudes and values is now recognised as an important source of information for economists, and the availability of the Eurobarometer survey data has put the European integration process under the magnifying glass (see, e.g., Gabel, 1998 or Nelsen andGuth, 2000). Concerning monetary issues in particular, G€ artner (1997), Hayo (1999) and Jonung (2004) examine the emergence of the euro as a currency and its popular support.But the trust of the Europeans in the ECB and its evolution over time has not yet been exhaustively explored. In fact, such a literature is only emerging. Moreover, research has mostly looked one-sidedly either at the typical macroeconomic (country level) indicators determining trust in a central bank, such as inflation, unemployment, real GDP growth and fiscal measures, or at the standard sociodemographic (individual level) determinants of central bank trust. By contrast, the present paper is among the first to examine micro-level sociodemographic factors from the Eurobarometer surveys jointly with alternative macroeconomic indicators of trust in the ECB over the whole span of the EMU across time (survey waves) and space (member countries). Our purpose with such an approach is to evaluate and compare the relative importance of these two major types of determinants of trust in the ECB, as well as to study their evolution as the EMU membership has been expanding. Kaltenthaler and Anderson (2001) analyse the support for a European monetary policy, but in a very early and short sample, 1994-97, that is when the single currency was not yet born. Hudson (2006) provides some evidence on trust in the ECB, showing that the usual sociodemographic variables are significant. However, the data used are for the year 2001 only. Banducci et al. (2009) examine the evolution of trust in the euro, analysing how Europeans have perceived the inflationary effects of the transition to the new currency. Kaltenthaler et al. (2010) have evaluated the distrust of the public opinion in the ECB. They find that the distru...

Does theory aid in ‡ation forecasting? To address this question, we develop a novel forecasting procedure based upon a New Keynesian Phillips Curve that incorporates time-varying trend in ‡ation, to capture shifts in central bank preferences and monetary policy frameworks. We generate theory-implied predictions for both the trend and cyclical components of in ‡ation, and recombine them to obtain an overall in ‡ation forecast. Using quarterly data for the Euro Area and the United States that cover almost half a century, we compare our in ‡ation forecasting procedure against the most popular time series models. We …nd that our theorybased forecasts outperform these benchmarks that previous studies found di¢ cult to beat. Our results are shown to be robust to structural breaks, geographic areas, and variants of the econometric speci…cation. Our …ndings suggest that the skepticism concerning the use of theory in forecasting is unwarranted, and theory should continue to play an important role in policymaking.

This paper recovers empirically and evaluates the feedback and stance of monetary policy in the United Kingdom throughout the inflation targeting period, implemented since October 1992. Its principal contribution is in comparing two subsamples, before the Bank of England was granted operational independence in May 1997 and after that. Our econometric approach is theoretically motivated by the New Keynesian model and relies on estimating forward-looking Taylor rules via the Generalized Method of Moments from quarterly data. Both final and real-time data, with alternative variable proxies and regression specifications, were used, to find that Taylor rules based on real-time data provide a more reasonable description of British monetary policy. Interestingly, the operational independence subperiod has differed from the pre-independence one -according to our real-time data set -in terms of a weaker response of the Bank of England to inflation but stronger sensitivity to the output gap and a less restrictive stance of monetary policy. Such a reaction would, first of all, characterize the Bank as a flexible inflation targeter, as should be expected by its legal mandate, and not a strict one; secondly, the asymmetry in the feedback function appears justified once the stage in the business cycle is also taken into consideration.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. (2005) for small open economies (SOE). Employing the Generalized Method of Moments (GMM), we find that the SOE NKPC is well supported in the new EU member states. We also find that the inflation process is dominated by domestic variables in the larger countries of our sample, whereas external variables are mostly relevant in the smaller countries. Terms of use: Documents in EconStor may D DE EP PA AR RT TM ME EN NT T O OF F E EC CO ON NO OM MI IC CS S J JO OH HA AN NN NE ES S K KE EP PL LE ER R U UN NI IV VE ER RS SI IT TY