On monetary policy rules for the euro area
AbstractIn this paper a New Keynesian model is described and partially estimated for the euro area. The model is then used to analyze the stabilizing properties of alternative monetary policy rules for the euro area: instrument (Taylor-type) rules and targeting rules. Our main finding is that if instrument rules are designed optimally they behave similarly to targeting rules both in terms of performance and robustness. This result is obtained for a variety of ECB preferences on stabilizing inflation, the output gap, and the nominal interest rate. Furthermore, the rule quasi-equivalence is also obtained if the ECB objective function is based on welfare maximization.
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Bibliographic InfoPaper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0415.
Length: 44 pages
Date of creation: Sep 2004
Date of revision:
Instrument rules; targeting rules; euro area;
Find related papers by JEL classification:
- E0 - Macroeconomics and Monetary Economics - - General
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
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- Moons, Cindy & Garretsen, Harry & van Aarle, Bas & Fornero, Jorge, 2007.
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- Feldkord, Eva-Ulrike, 2005. "On the relevance of monetary aggregates in monetary policy models," HWWA Discussion Papers 317, Hamburg Institute of International Economics (HWWA).
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