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How the Bundesbank Conducts Monetary Policy

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Author Info
Richard Clarida
Mark Gertler

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Abstract

This paper analyzes German monetary policy in the post-Bretton Woods era. Despite the public focus on monetary targeting, in practice, German monetary policy involves the management of short term interest rates, as it does in the United States. Except during the mid to late 1970s, the Bundesbank has aggressively adjusted interest rates to achieve and maintain low inflation. The performance of the real economy, however, also influences its decision-making. Our formal analysis suggests that the Bundesbank has adjusted short term interest rates according to a modified version of the feedback rule that Taylor (1994) has used to characterize the behavior of the Federal Reserve Board under Alan Greenspan.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5581.

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Date of creation: May 1996
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Handle: RePEc:nbr:nberwo:5581

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E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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  1. George A. Kahn & Kristina Jacobson, 1989. "Lessons from West German monetary policy," Economic Review, Federal Reserve Bank of Kansas City, issue Apr, pages 18-35. [Downloadable!]
  2. Martin Eichenbaum & Charles Evans, 1992. "Some empirical evidence on the effects of monetary policy shocks on exchange rates," Working Paper Series, Macroeconomic Issues 92-32, Federal Reserve Bank of Chicago.
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  3. von Hagen, J, 1995. "Inflation and Monetary Targeting in Germany," Papers 03, American Institute for Contemporary German Studies-.
  4. Clarida, Richard & Galí, Jordi, 1994. "Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks?," CEPR Discussion Papers 951, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. 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)
  6. Bernanke, Ben S. & Mihov, Ilian, 1995. "Measuring Monetary Policy," Economics Series 10, Institute for Advanced Studies. [Downloadable!]
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  7. Blanchard, Olivier Jean, 1989. "A Traditional Interpretation of Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 79(5), pages 1146-64, December. [Downloadable!] (restricted)
  8. Bruce Kasman, 1992. "A comparison of monetary policy operating procedures in six industrial countries," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 5-24.
  9. Uctum, Merih, 1999. "European integration and asymmetry in the EMS," Journal of International Money and Finance, Elsevier, vol. 18(5), pages 769-798, October. [Downloadable!] (restricted)
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  10. Grilli, Vittorio & Roubini, Nouriel, 1992. "Liquidity and exchange rates," Journal of International Economics, Elsevier, vol. 32(3-4), pages 339-352, May. [Downloadable!] (restricted)
  11. Gordon, David B & Leeper, Eric M, 1994. "The Dynamic Impacts of Monetary Policy: An Exercise in Tentative Identification," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1228-47, December. [Downloadable!] (restricted)
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  12. Bharat Trehan, 1988. "The practice of monetary targeting: a case study of the West German experience," Economic Review, Federal Reserve Bank of San Francisco, issue Spr, pages 30-44. [Downloadable!]
  13. N. Gregory Mankiw, 1994. "Monetary Policy," NBER Books, National Bureau of Economic Research, Inc, number greg94-1.
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