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The European Central Bank, the Federal Reserve and the Bank of England: Is the Taylor Rule a useful benchmark for the last decade?

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  • Antonio Forte

Abstract

In this article, using a Taylor type rule, I focus on the Euro era and compare the ECB with other two central banks, the Fed and the Bank of England. A very interesting result comes out from the analysis: it seems that these central banks do not observe the inflation course before deciding on the variation of the interest rates. This result can be linked to two ideas: firstly, the use of stationary time series drops out the significance of the inflation gap; secondly, a really forward looking central bank focuses on other macroeconomic leading indicators instead of examining the inflation gap.

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Bibliographic Info

Article provided by Economics and Econometrics Research Institute (EERI), Brussels in its journal Journal of Economics and Econometrics.

Volume (Year): 53 (2010)
Issue (Month): 2 ()
Pages: 1-31

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Handle: RePEc:eei:journl:v:53:y:2010:i:2:p:1-31

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Keywords: Taylor rule; European Central Bank; Federal Reserve; Bank of England.;

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Cited by:
  1. d'Artis Kancs & Julia Kielyte, 2010. "European Integration and Labour Migration," EERI Research Paper Series EERI_RP_2010_27, Economics and Econometrics Research Institute (EERI), Brussels.
  2. Anderson, James, 2011. "Migration of Labor in Europe. Theory and Evidence," Working Papers of Institute for Economic Forecasting 110427, Institute for Economic Forecasting.
  3. Emna Trabelsi, 2012. "The relationship between central bank transparency and the quality of inflation forecasts: is it U-shaped?," EERI Research Paper Series EERI_RP_2012_02, Economics and Econometrics Research Institute (EERI), Brussels.

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