Is the View from the Eurotower Purely European? National Divergence and ECB Interest Rate Policy
AbstractThe official view on ECB monetary policy claims that monetary decisions are based solely on average data for the euro zone and that diverging regional developments are disregarded. However, experience from other two tier central banks and theoretical considerations suggest that this official view cannot be accepted without empirical testing. A generalised monetary policy reaction function is developed which allows for an influence of regional divergence. The empirical tests are based on reaction function estimations and a probit model of interest rate decisions for the first years of the euro area. The results offer some first weak support for an impact of regional divergence in ECB decision making. The results further clarify that ignoring a potential national perspective may lead to a serious bias in the estimation of ECB reaction functions. The paper concludes that the correct identification of a possible impact of regional divergence is important for the transparency issue. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-69.
Date of creation: 2002
Date of revision:
ECB; monetary policy; Taylor rule;
Other versions of this item:
- Friedrich Heinemann & Felix P. Huefner, 2004. "Is The View From The Eurotower Purely European? - National Divergence And Ecb Interest Rate Policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(4), pages 544-558, 09.
- Huefner, Felix P & Friedrich Heinemann, 2003. "Is the View from the Eurotower Purely European? - National Divergence and ECB Interest Rate Policy," Royal Economic Society Annual Conference 2003 110, Royal Economic Society.
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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.:
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1997.
"Monetary Policy Rules in Practice: Some International Evidence,"
CEPR Discussion Papers
1750, C.E.P.R. Discussion Papers.
- Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
- Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc.
- 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.
- Ellen E. Meade & D. Nathan Sheets, 2002.
"Regional influences on U.S. monetary policy: some implications for Europe,"
International Finance Discussion Papers
721, Board of Governors of the Federal Reserve System (U.S.).
- Ellen E. Meade & D. Nathan Sheets, 2002. "Regional Influences on U.S. Monetary Policy: Some Implications for Europe," CEP Discussion Papers dp0523, Centre for Economic Performance, LSE.
- Jon Faust & John H. Rogers & Jonathan H. Wright, 2001. "An empirical comparison of Bundesbank and ECB monetary policy rules," International Finance Discussion Papers 705, Board of Governors of the Federal Reserve System (U.S.).
- Michael Dueker, 1999. "Measuring monetary policy inertia in target Fed funds rate changes," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 3-10.
- Aksoy, Yunus & De Grauwe, Paul & Dewachter, Hans, 2002. "Do asymmetries matter for European monetary policy?," European Economic Review, Elsevier, vol. 46(3), pages 443-469, March.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.