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%T The economic consequences of Euro-area macro-modelling shortcuts
%A Monteforte, Libero
%A Siviero, Stefano
%J Applied Economics
%N 19
%P 2399-2415
%V 42
%D 2008
%K Euro area; monetary policy rules; robustness
%= 2011-04-04T13:51:00Z
%~ http://www.peerproject.eu/
%> https://nbn-resolving.org/urn:nbn:de:0168-ssoar-242456
%X Should euro-area economies be modelled in an aggregate (area-wide) fashion
or in a disaggregate (multi-country) one? This paper tackles that question
from both a statistical and an economic viewpoint. From a statistical
viewpoint, aggregation bias criteria are found to signal that the degree of
structural heterogeneity among euro-area economies is such that the loss
of information entailed by an aggregate modelling approach may be far
from trifling. From an economic viewpoint, we investigate the following
issue: Are those statistically detectable heterogeneities of any practical
relevance when it comes to supporting monetary policy decision-making?
To provide an answer to this question, we compute simple optimal monetary
policy reaction functions on the basis of either an aggregate model or
a disaggregate one, and compare the associated welfare losses. The results
suggest that the welfare under-performance of an area-wide-model-based
rule is not only non negligible, but also robust with respect to a number
of sensitivity analyses.
%C USA
%G en
%9 journal article
%W GESIS - http://www.gesis.org
%~ SSOAR - http://www.ssoar.info