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A mark-up model of inflation for the euro area.

Abstract:

Equilibrium correction models of the price level are often used to model inflation. Such models assume that the long-run markup of prices over costs is fixed, but this may not be true for the Euro area economy, which has undergone major structural reforms over the last 25 years. We allow for shifts in the markup factor through estimating an equation that includes a timevarying intercept. The model fits the data better than a linear alternative, and suggests that a reduction in the price-cost ...

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Publisher:
European Central Bank
Volume:
306
Series:
ECB Working Paper Series
Host title:
European Central Bank, Working Paper Series
Publication date:
2004-02-01
Paper number:
306
Language:
English
UUID:
uuid:ab130697-0bf9-4eda-a343-a75c6e0a20ef
Local pid:
oai:economics.ouls.ox.ac.uk:12913
Deposit date:
2011-08-15

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