And if one size fit all after all ? A counterfactual examination of the ECB monetary policy under Duisenberg presidency
How did European Central Bank (ECB) fit the disparate macroeconomic needs of euro zone members? The purpose of this paper consists in providing quantitative answers to this question presenting an original methodology. After estimating unified frameworks of monetary transmission mechanisms for nine euro zone countries, we compute the national evolutions of output gap and inflation since 1999, in a fictitious context where the euro has never been launched. Using a loss function as a standard for macroeconomic stabilization, these simulations are then compared with the actual outcomes over the period 1999-2003. Our major result is that the ECB did a far better stabilization job for euro zone countries than national central banks would have done.
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|Date of revision:||Nov 2005|
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- John B. Taylor, 1994. "The inflation/output variability trade-off revisited," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 21-24.
- 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.
- Taylor, John B., 1998.
"The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank,"
649, Stockholm University, Institute for International Economic Studies.
- Taylor, John B., 1999. "The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European central bank," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 655-679, June.
- Svensson, Lars E O, 2002. "The Inflation Forecast and the Loss Function," CEPR Discussion Papers 3365, C.E.P.R. Discussion Papers.
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