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The Federal Funds Rate and the Conduction of the International Orchestra

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  • Antonio Ribba

Abstract

In the first ten years of EMU, monetary policy choices of the European Central Bank (ECB) in setting the short-term interest rate have followed, systematically, monetary policy decisions made by the Federal Reserve System (Fed). For, despite the presence of variable lags with respect to Fed decisions, turning points of European short-term interest rates have been largely anticipated by movements in the federal funds rate. In this paper we show that, in the context of a bivariate cointegrated system, a clear long-run US dominance emerges. Moreover, the structural analysis reveals that a permanent increase in the federal funds rate causes a permanent one-for-one movement in the eonia rate.

Suggested Citation

  • Antonio Ribba, 2010. "The Federal Funds Rate and the Conduction of the International Orchestra," Department of Economics 0629, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    • Handle: RePEc:mod:depeco:0629
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    Cited by:

    1. Raphael Raduzzi & Antonio Ribba, 2020. "The macroeconomics outcome of oil shocks in the small Eurozone economies," The World Economy, Wiley Blackwell, vol. 43(1), pages 191-211, January.
    2. Cavallo, Antonella & Ribba, Antonio, 2015. "Common macroeconomic shocks and business cycle fluctuations in Euro area countries," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 377-392.
    3. Antonio Ribba, 2014. "Sources of unemployment fluctuations in the USA and in the Euro Area in the last decade," Economics Bulletin, AccessEcon, vol. 34(2), pages 681-694.

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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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