And if one size fit all after all ? A counterfactual examination of the ECB monetary policy under Duisenberg presidency

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And if one size fit all after all ? A counterfactual examination of the ECB monetary policy under Duisenberg presidency

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Jérôme Héricourt () (TEAM)

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Jérôme Héricourt

Abstract

How did European Central Bank (ECB) fit the disparate macroeconomic needs of euro zone members? The purpose of this paper consists in providing quantitative answers to this question presenting an original methodology. After estimating unified frameworks of monetary transmission mechanisms for nine euro zone countries, we compute the national evolutions of output gap and inflation since 1999, in a fictitious context where the euro has never been launched. Using a loss function as a standard for macroeconomic stabilization, these simulations are then compared with the actual outcomes over the period 1999-2003. Our major result is that the ECB did a far better stabilization job for euro zone countries than national central banks would have done.

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Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number bla04004a.

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Length: 54 pages
Date of creation: Jan 2004
Date of revision: Nov 2005
Handle: RePEc:mse:wpsorb:bla04004a

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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
F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-12-09 (All new papers)
NEP-CBA-2005-12-09 (Central Banking)
NEP-CMP-2005-12-09 (Computational Economics)
NEP-EEC-2005-12-09 (European Economics)
NEP-MAC-2005-12-09 (Macroeconomics)
NEP-MON-2005-12-09 (Monetary Economics)

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.:

Taylor, John B., 1999. "The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European central bank," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 655-679, June. [Downloadable!] (restricted)
Other versions:
- Taylor, John B., 1998. "The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank," Seminar Papers 649, Stockholm University, Institute for International Economic Studies. [Downloadable!]
John B. Taylor, 1994. "The inflation/output variability trade-off revisited," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 21-24. [Downloadable!]
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)
Svensson, Lars E O, 2002. "The Inflation Forecast and the Loss Function," CEPR Discussion Papers 3365, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

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Cited by:
(explanations, 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.)

Theodoros S. Papaspyrou, 2007. "Economic Policy in EMU: Community Framework and National Strategies – focus on Greece," GreeSE â Hellenic Observatory Papers on Greece and Southeast Europe 04, Hellenic Observatory, LSE. [Downloadable!]

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