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Standard Taylor rules revisited - A cross country study for European countries

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  • Eschenhof, Sabine

Abstract

In this paper we want to estimate basic Taylor rules with a cross country study approach for European countries before the reorganization of the system of central banks. We compare basic and extended Taylor rules to give a hint if the exchange rate plays a significant role in the decision making of monetary policy. Fixed Effects, GMM and SGMM estimators are used to check for robustness. The obtained results adumbrate that there may be an influence of exchange rate changes on the monetary policy decision making process but the results are not fully robust and deliver only a weak tendency.

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Bibliographic Info

Paper provided by Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL) in its series Darmstadt Discussion Papers in Economics with number 40391.

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Date of creation: Dec 2009
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Publication status: Published in Darmstadt Discussion Papers in Economics . 196 (2009-12)
Handle: RePEc:dar:ddpeco:40391

Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/40391/
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Related research

Keywords: Cross Country Study; Taylor Rules; Exchange Rate; FE Estimation; SGMM Estimation;

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  1. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  2. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1908, C.E.P.R. Discussion Papers.
  3. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 39(1), pages 195-214, December.
  4. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 98-03, Federal Reserve Bank of San Francisco.
  5. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  6. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 5-27, July.
  7. Thomas Lubik & Frank Schorfheide, 2003. "Do Central Banks Respond to Exchange Rate Movements? A Structural Investigation," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 505, The Johns Hopkins University,Department of Economics.
  8. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  9. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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