ECB Working Paper Series

RESEARCH - "An estimated stochastic dynamic general equilibrium model of the euro area", by Frank Smet and Raf Wouters, August 2002. The paper concludes that there is a considerable degree of price and wage stickiness in the euro area. The paper also finds price and wage inflation depend to some extent on past inflation but that the forward-looking component clearly dominates, in particular in the price setting equation.

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Abstract

This paper develops and

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