Monetary policy and the inflation process

The second meeting of Central Bank Model Builders was held at the BIS on 16th-17th January, 1997. Following the suggestions of participants in the first meeting, the broad agenda was: "Monetary policy and the inflation process".

On the basis of suggestions of individual central banks and the papers submitted, three sub-themes emerged which were discussed in separate sessions. The first dealt with Estimates of potential output, the NAIRU and inflation, a theme which was addressed in five papers. The second session looked more closely on The modelling of the wage and price formation process, a sub-theme addressed by another five papers. The final session dealt with Modelling monetary policy: responses, influences and effects and contained a broader range of subjects, including, among others, the impact of inflation on growth, lags in the transmission from changes in monetary policy to output, the modelling of credibility effects and estimating money demand equations based on European-wide measures of monetary aggregates. The contributions (including discussants' comments) are reproduced in the order in which they were presented; the remainder of this introduction provides a summary of each paper, with the last section attempting to derive some broad conclusions.