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Is it really more dispersed?

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  • Dominic Quint

    (Freie Universität Berlin)

Abstract

The ECB’s one size monetary policy is unlikely to fit all euro area members at all times, which raises the question of how much monetary policy stress this causes at the national level. I measure monetary policy stress as the difference between actual ECB interest rates and Taylor-rule implied rates at the member state level. These rates explicitly take into account the natural rate of interest to capture changes in trend growth. I find that monetary policy stress within the euro area has been steadily decreasing prior to the recent financial crisis. Current stress levels are not only lower today than in the late 1990s, they are also in line with what is commonly observed among U.S. states or pre-euro German Länder.

Suggested Citation

  • Dominic Quint, 2016. "Is it really more dispersed?," International Economics and Economic Policy, Springer, vol. 13(4), pages 593-621, October.
  • Handle: RePEc:kap:iecepo:v:13:y:2016:i:4:d:10.1007_s10368-015-0313-3
    DOI: 10.1007/s10368-015-0313-3
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