Interest Rate Setting by the ECB, 1999-2006: Words and Deeds
We estimate empirical reaction functions for the European Central Bank (ECB) with ordered-probit techniques, using the ECB's Monthly Bulletin to guide the choice of variables. The results show that policy reacts to the state of the real economy, M3 growth, and exchange rate changes but not to inflation. We develop quantitative indicators of the Governing Council's assessment of economic conditions to understand its interest rate decisions and argue that the ECB has not reacted to inflation shocks because they were seen as temporary. By contrast, policy responses to economic activity are strong because it impacts on the outlook for inflation.
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.:
- Svensson, Lars E.O., 1997.
"Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets,"
615, Stockholm University, Institute for International Economic Studies.
- Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
- Svensson, Lars E O, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," CEPR Discussion Papers 1511, C.E.P.R. Discussion Papers.
- Lars E O Svensson, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Bank of England working papers 56, Bank of England.
- Svensson, L-E-O, 1996. "Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets," Papers 615, Stockholm - International Economic Studies.
- Lars E. O. Svensson, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," NBER Working Papers 5797, National Bureau of Economic Research, Inc.
- Marie Musard-Gies, 2006. "Do European Central Bank'S Statements Steer Interest Rates In The Euro Zone?," Manchester School, University of Manchester, vol. 74(s1), pages 116-139, 09.
- Helge Berger & Jakob de Haan & Jan‐Egbert Sturm, 2011.
"Does money matter in the ECB strategy? New evidence based on ECB communication,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 16(1), pages 16-31, 01.
- Berger, Helge & de Haan, Jakob & Sturm, Jan-Egbert, 2006. "Does money matter in the ECB strategy? New evidence based on ECB communication," Discussion Papers 2006/1, Free University Berlin, School of Business & Economics.
- Helge Berger & Jakob de Haan & Jan-Egbert Sturm, 2006. "Does Money Matter in the ECB Strategy? New Evidence Based on ECB Communication," KOF Working papers 06-125, KOF Swiss Economic Institute, ETH Zurich.
- Helge Berger & Jan-Egbert Sturm, 2006. "Does Money Matter in the ECB Strategy? New Evidence Based on ECB Communication," CESifo Working Paper Series 1652, CESifo Group Munich.
- Gourieroux, C. & Monfort, A. & Trognon, A., 1985. "A General Approach to Serial Correlation," Econometric Theory, Cambridge University Press, vol. 1(03), pages 315-340, December.
- Kai Carstensen, 2006.
"Estimating the ECB Policy Reaction Function,"
German Economic Review,
Verein für Socialpolitik, vol. 7, pages 1-34, 02.
- Athanasios Orphanides, 1998.
"Monetary policy rules based on real-time data,"
Finance and Economics Discussion Series
1998-03, Board of Governors of the Federal Reserve System (U.S.).
- Ehrmann, Michael & Fratzscher, Marcel, 2005. "Communication and decision-making by central bank committees: different strategies, same effectiveness?," Working Paper Series 0488, European Central Bank.
- Carlo Rosa & Giovanni Verga, 2005. "Is ECB Communication Effective?," CEP Discussion Papers dp0682, Centre for Economic Performance, LSE.
- Gerlach, Stefan, 2004. "Interest Rate Setting by the ECB: Words and Deeds," CEPR Discussion Papers 4775, C.E.P.R. Discussion Papers.
- 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.
- Gourieroux Christian & Monfort Alain & Trognon A, 1984. "General approach of serial correlation (a)," CEPREMAP Working Papers (Couverture Orange) 8424, CEPREMAP.
- Eichengreen, Barry & Watson, Mark W & Grossman, Richard S, 1985. "Bank Rate Policy under the Interwar Gold Standard: A Dynamic Probit Model," Economic Journal, Royal Economic Society, vol. 95(379), pages 725-45, September.
When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2007:q:3:a:1. See general 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: (Timo Laurmaa)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.