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Mr. Emil Stavrev
This paper's analysis of growth and inflation dispersions in the euro area reveals several findings. First, these dispersions have declined appreciably since EMU; remaining dispersions are small but persistent, relating mainly to country-specific shocks, not differences in the transmission of common shocks. Second, the different behavior of interest rates just before and after the introduction of the euro has contributed significantly to growth dispersions. However, this has been a one-off shock whose effects, particularly on construction, should be declining over time. Third, financial sector integration could do much more to insure countries against shocks and increase consumption smoothing.
Mr. Emil Stavrev

I. I ntroduction Growth and inflation dispersions in the euro area have declined since 1990 and are now comparable to those among US states, but they are longer-lasting. As business cycles have become more synchronized after euro adoption, the contribution of the cyclical component to growth dispersions has declined. However, the contribution of the trend component has increased, partly as a result of different degrees of structural reform implementation among euro-area members ( Figure 1 ). The persistence of remaining inflation dispersions has come with

Mr. Emre Alper, Mr. Niko A Hobdari, and Ali Uppal

, been on a trend decline over the last two decades, reflecting improved macroeconomic policy management in most countries in the region. Nevertheless, inflation in SSA remained well above the levels prevailing in other regions ( Figure III.1 ) The experience with disinflation in SSA has also varied widely: about a quarter of SSA countries actually experienced increasing inflation trends during 2000-16, and consumer price inflation dispersion in SSA remained much higher relative to AEs or EMs. Figure III.1: Annual Consumer Price Inflation Across the World

Bertrand Gruss, Mrs. Sandra V Lizarazo Ruiz, and Mr. Francesco Grigoli

inflation and federal funds rate forecasts is a key feature of our dataset, which we use to identify the impact of monetary policy surprises on inflation dispersion. Figure 1 illustrates this timeline. Each analyst can submit a forecast for the federal funds rate, p t − 1 + γ | t − 1 e , for period t – 1 + γ at any time during [t – 1,t – 1 + γ). Then, the analyst observes the federal funds rate decision p t − 1 + γ | t − 1 + γ r , which takes place and is announced in correspondence of the policy meeting at t – 1 + γ. Subsequently, the same analyst prepares the

International Monetary Fund

(i.e., inflation) convergence among ECCU countries has increased for tradables, price indexes for nontradables appear to have become more dispersed ( Figures II.7 and II.8 ). With the exception of fuel and light, price index dispersion of all other tradable CPI components has decreased during 1990–2006, with the decline being very pronounced for food and beverages. As for nontradables, however, the inflation dispersion of the housing and transportation and communication components has increased. Inflation dispersion of the recreation and education and health

Bertrand Gruss, Mrs. Sandra V Lizarazo Ruiz, and Mr. Francesco Grigoli
Anchoring of inflation expectations is of paramount importance for central banks’ ability to deliver stable inflation and minimize price dispersion. Relying on daily interest rates and inflation forecasts from major financial institutions in the United States, we calculate monetary policy surprises of individual analysts as the unexpected changes in the federal funds rate before the meetings of the Federal Reserve Board. We then assess the effect of monetary policy surprises on the dispersion of inflation expectations, a proxy for the extent of anchoring, which is based on the same analysts’ inflation projections submit-ted after the Fed meetings. With an identification strategy that hinges on a tight window around the Fed meetings, we find that monetary policy surprises lead to an increase in the dispersion of inflation expectations up to nine months after the policy meeting. We rationalize these results with a partial equilibrium model that features rational expectations and sticky information. When we allow the degree of information rigidity to depend on the realization of firm-specific shocks, the theoretical results are qualitatively consistent and quantitatively close to the empirical evidence.
Mr. Emil Stavrev

Front Matter Page European Department Authorized for distribution by Jörg Decressin Contents I. Introduction II. Literature Review III. Analytical Framework and Estimation Results A. Common versus country-specific shocks B. Country-specific developments and income and price level convergence C. Persistence of country-specific developments D. Shock transmission and relative importance of channels E. Cross-country consumption and income smoothing IV. Conclusions References Figures 1. Growth and Inflation Dispersions 2

Mr. Andrea Pescatori

Front Matter Page Western Hemisphere Department Contents I. INTRODUCTION II. THE CENTRAL BANK OF CHILE INFLATION-TARGETING FRAMEWORK III. DATA AND METHODOLOGY IV. PREDICTABILITY V. EFFICACY: FIXED-INCOME MARKETS VI. EFFICACY: EXCHANGE RATE AND STOCK MARKET IMPACT VII. MONETARY POLICY COMMUNICATION AND INFLATION DISPERSION VIII. THE MACROECONOMIC IMPACT X. REFERENCES FIGURES Figure 1 Monetary policy rate and surprise meetings Figure 2 Monetary policy surprises and forecast disagreement Figure 3 Monetary policy surprise