How the European Central Bank decided its early monetary policy?
AbstractThe main goal of this paper is to detect the mechanisms that should rationally stimulate the decision making-policies of the European Central Bank (ECB). This is carried out under the framework of theoretical principles of interest rate rules. Firstly, we deduce a set of logically advisable guidelines for the strategy actually developed by this central bank. Then we contrast a wide set of hypotheses with reference to those variables the ECB takes into account on deciding its monetary policy, with a flexible treatment regarding the number of months of advance or delay in the explanatory variables. The results lead us to the conclusion that the ECB, besides adopting a smooth strategy, especially bears in mind the expected core inflation rate, with a reaction coefficient adjusted to that initially proposed by Taylor. The economic growth rate, though it has a significant positive coefficient, matters relatively little and is backward looking. Finally, we evaluate up to what point the behaviour of the ECB is assimilative to an inflation targeting framework, solving this question affirmatively.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 39 (2007)
Issue (Month): 7 ()
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- Jonathan Benchimol & André Fourçans, 2010.
"Money and risk aversion in a DSGE framework : a bayesian application to the euro zone,"
- Benchimol, Jonathan & Fourçans, André, 2012. "Money and risk in a DSGE framework: A Bayesian application to the Eurozone," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 95-111.
- Jonathan Benchimol & André Fourçans, 2010. "Money and risk aversion in a DSGE framework: a Bayesian application to the Euro zone," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) hal-00800082, HAL.
- Benchimol, Jonathan & Fourçans, André, 2010. "Money and Risk Aversion in a DSGE Framework: A Bayesian Application to the Euro Zone," ESSEC Working Papers DR 10005, ESSEC Research Center, ESSEC Business School.
- André Fourçans & Jonathan Benchimol, 2009. "Money in a DSGE framework with an application to the Euro Zone," Post-Print hal-00553495, HAL.
- Benchimol, Jonathan & Fourçans, André, 2009. "Money in a DSGE framework with an application to the Euro Zone," ESSEC Working Papers DR 09005, ESSEC Research Center, ESSEC Business School.
- Ansgar Belke & Jens Klose, 2009.
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Discussion Papers of DIW Berlin
917, DIW Berlin, German Institute for Economic Research.
- Ansgar Belke & Jens Klose, 2009. "Does the ECB Rely on a Taylor Rule? - Comparing Ex-post with Real Time Data," Ruhr Economic Papers 0133, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Fourçans, André & Vranceanu, Radu, 2008. "Money in the Inflation Equation: the Euro Area Evidence," ESSEC Working Papers DR 08012, ESSEC Research Center, ESSEC Business School.
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