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Monetary policy in the euro area

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  • PHILIP ARESTIS
  • GEORGIOS CHORTAREAS

Abstract

We examine the conduct of monetary policy as implemented by the European Central Bank (ECB) throughout the euro area. Two distinct but closely related approaches are utilized, both of which rely on the assumption that monetary policy can be usefully characterized in terms of a simple Taylor rule-type of reaction function. First, the ECB policy is assessed against the benchmark of the Bundesbank's reaction function and, second, we impose ad hoc Taylor rules. The policy maker's perception about the equilibrium real interest rate is important. Our analysis suggests that such perceptions may have changed over the period of the ECB's short life.

Suggested Citation

  • Philip Arestis & Georgios Chortareas, 2006. "Monetary policy in the euro area," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 28(3), pages 371-394.
    • Handle: RePEc:mes:postke:v:28:y:2006:i:3:p:371-394
    DOI: 10.2753/PKE0160-3477280301
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    Cited by:

    1. Philip Arestis & Georgios E Chortareas, 2008. "Atheoretical and Theory-Based Approaches to the Natural Equilibrium Real Interest Rate," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 34(3), pages 390-405.
    2. Angel Asensio, 2006. "Monetary and budgetary-fiscal policy interactions in a Keynesian heterogeneous monetary union," Post-Print halshs-00120406, HAL.
    3. Eckhard Hein & Christian Schoder, 2011. "Interest rates, distribution and capital accumulation -- A post-Kaleckian perspective on the US and Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(6), pages 693-723, November.
    4. Yoshiyasu Ono, 2008. "Determinacy of Equilibrium under Various Phillips Curves," ISER Discussion Paper 0706, Institute of Social and Economic Research, Osaka University.
    5. repec:zbw:bofrdp:2009_011 is not listed on IDEAS
    6. Lee, Jim & Crowley, Patrick M., 2009. "Evaluating the stresses from ECB monetary policy in the euro area," Research Discussion Papers 11/2009, Bank of Finland.
    7. Lee, Jim, 2009. "Evaluating monetary policy of the euro area with cross-country heterogeneity: Evidence from a New Keynesian model," Economic Systems, Elsevier, vol. 33(4), pages 325-343, December.
    8. Lee, Jim & Crowley, Patrick M., 2009. "Evaluating the stresses from ECB monetary policy in the euro area," Bank of Finland Research Discussion Papers 11/2009, Bank of Finland.
    9. Jan Iša & Ivan Okáli, 2008. "Európska menová únia, optimálna menová oblasť a možné dôsledky vstupu slovenska do eurozóny [European monetary union, optimum currency area and possible effects of slovakia's joining the euro area]," Politická ekonomie, Prague University of Economics and Business, vol. 2008(3), pages 318-344.

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