The European Central Bank monetary policy and the Taylor rule, 1999-2009
ABSTRACT: In this paper, we try to see whether there is a model that can describe ECB monetary policy in simple, intuitive terms, and whether the model is consistent over time. We find such a model, which has the form of the Taylor rule. In fact, the main result of the paper points that ECB monetary...
| Authors: | , |
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| Format: | article |
| Publication Date: | 2013 |
| Country: | España |
| Institution: | Universidad de Cantabria (UC) |
| Repository: | UCrea Repositorio Abierto de la Universidad de Cantabria |
| Language: | English |
| OAI Identifier: | oai:repositorio.unican.es:10902/2562 |
| Online Access: | http://hdl.handle.net/10902/2562 |
| Access Level: | Open access |
| Keyword: | Monetary policy ECB Taylor rule Optimal interest rates Política monetaria BCE Regla de Taylor Tipos de interés |
| Summary: | ABSTRACT: In this paper, we try to see whether there is a model that can describe ECB monetary policy in simple, intuitive terms, and whether the model is consistent over time. We find such a model, which has the form of the Taylor rule. In fact, the main result of the paper points that ECB monetary policy in the last decade can indeed be described by a Taylor rule, with a caveat: the model fits the data soundly for two subperiods, 1999-2002 and 2007-2009, but does not work well for 2003-2006. Furthermore, the parameters that describe the Taylor rule are fairly stable over time, although the weight placed in output is slightly larger in 2007-2009 than in 1999-2002. Next, we compute optimal interest rates for some individual representative countries and, especially in the first of the subperiods for a set of countries that do not belong to the core of the Eurozone, find some significant divergences among their optimal interest rates and the rate set by the ECB. |
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