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Is the ECB so special? A qualitative and quantitative analysis

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Author Info
Fourçans, André () (ESSEC Business School)
Vranceanu, Radu () (ESSEC Business School)

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Abstract

This paper analyses the European Central Bank (ECB) monetary policy over the period 1999-2005, both from a qualitative and a quantitative perspective, and compares it with the Federal Reserve Bank. The qualitative approach builds on information conveyed by various speeches of the central bank officers, mainly the President of the ECB, Jean-Claude Trichet. The quantitative analysis provides several estimates of what could have been the ECB and Fed interest rate rules. It also develops a VAR model of both the Euro zone and the US economy so as to analyze dynamic effects of an interest rate shock. Both the qualitative and quantitative analyses point to the difficult task of the ECB, which must build credibility while managing monetary policy under major uncertainty about the structure of the new Euro area. They also suggest that, apart from the ECB’s credibility building, differences between the observed behaviour of the ECB and the Fed over the time period under investigation should be accounted for by differences in the economic outlook of the two areas, rather than in the goals of the central bankers.

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Publisher Info
Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 06004.

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Length: 38 pages
Date of creation: Mar 2006
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Handle: RePEc:ebg:essewp:dr-06004

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Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
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Related research
Keywords: ECB and Fed; Euro area; Monetary policy; Taylor rule; VAR;

Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
F01 - International Economics - - General - - - Global Outlook

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Juan Ayuso & Rafael Repullo, 2003. "A Model of the Open Market Operations of the European Central Bank," Economic Journal, Royal Economic Society, vol. 113(490), pages 883-902, October. [Downloadable!] (restricted)
    Other versions:
  2. Paolo Surico, 2003. "How does the ECB target inflation?," Working Paper Series 229, European Central Bank. [Downloadable!]
    Other versions:
  3. Ralf M. Fendel & Michael R. Frenkel, 2006. "Five Years Of Single European Monetary Policy In Practice: Is The Ecb Rule-Based?," Contemporary Economic Policy, Western Economic Association International, vol. 24(1), pages 106-115, 01. [Downloadable!] (restricted)
  4. Stephan Sauer & Jan-Egbert Sturm, 2003. "Using Taylor Rules to Understand ECB Monetary Policy," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Gerlach, Stefan & Svensson, Lars E. O., 2003. "Money and inflation in the euro area: A case for monetary indicators?," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1649-1672, November. [Downloadable!] (restricted)
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  6. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  7. Fourcans, Andre & Vranceanu, Radu, 2004. "The ECB interest rate rule under the Duisenberg presidency," European Journal of Political Economy, Elsevier, vol. 20(3), pages 579-595, September. [Downloadable!] (restricted)
  8. Barbara Roffia & Dieter Gerdesmeier, 2003. "A comprehensive model on the Euro overnight rate," Working Paper Series 206, European Central Bank. [Downloadable!]
  9. Staff Team, 2000. "Monetary and Exchange Rate Policies of the Euro Area," IMF Staff Country Reports 00/46, International Monetary Fund.
  10. William Kerr & Robert G. King, 1996. "Limits on interest rate rules in the IS model," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 47-75. [Downloadable!]
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