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Modeling interest rate setting at the European Central Bank with bargaining models and counterfactuals

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  • James McNeil

    (Department of Economics, Dalhousie University)

Abstract

I analyze whether the interest rate decisions of the European Central Bank (ECB) favor the national interests of the largest euro-area member states. Because voting records are unavailable, unobserved monetary policy preferences are based on hypothetical interest rate paths generated from monetary policy rules estimated in the pre-euro era. Comparing the actual euro-area interest rate to these counterfactual interest rates, I do not find that ECB interest rates are best described by competing national interests. Instead, countries appear to make decisions with respect to euro-area economic conditions. These findings contradict several studies which find that policy disproportionately favors the national objectives of larger member states.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • James McNeil, 2020. "Modeling interest rate setting at the European Central Bank with bargaining models and counterfactuals," Working Papers daleconwp2020-03, Dalhousie University, Department of Economics.
    • Handle: RePEc:dal:wpaper:daleconwp2020-03
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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