The European Central Bank, the Federal Reserve and the Bank of England: Is the Taylor Rule a useful benchmark for the last decade?
In this article, using a Taylor type rule, I focus on the Euro era and compare the ECB with other two central banks, the Fed and the Bank of England. A very interesting result comes out from the analysis: it seems that these central banks do not observe the inflation course before deciding on the variation of the interest rates. This result can be linked to two ideas: firstly, the use of stationary time series drops out the significance of the inflation gap; secondly, a really forward looking central bank focuses on other macroeconomic leading indicators instead of examining the inflation gap.
Volume (Year): 53 (2010)
Issue (Month): 2 ()
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