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The European Central Bank, the Federal Reserve and the Bank of England: is the Taylor Rule an useful benchmark for the last decade?

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  • Forte, Antonio

Abstract

The Taylor rule has been used in many studies in order to analyse the monetary policies. In my work I focus on the Euro era and compare the ECB with other two central banks, the Fed and the BoE. A very interesting result comes out from the analysis: it seems that these central banks do not observe the inflation course before deciding about the variation of the interest rates. This result can be linked to two ideas: firstly, the use of stationary time series drops out the significance of the inflation gap as regressor; secondly, a really forward looking central bank focuses on other macroeconomic leading indicators instead of examining the realized or expected inflation gap.

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  • Forte, Antonio, 2009. "The European Central Bank, the Federal Reserve and the Bank of England: is the Taylor Rule an useful benchmark for the last decade?," MPRA Paper 18309, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:18309
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    3. Emna Trabelsi, 2012. "The relationship between central bank transparency and the quality of inflation forecasts: is it U-shaped?," EERI Research Paper Series EERI_RP_2012_02, Economics and Econometrics Research Institute (EERI), Brussels.

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    More about this item

    Keywords

    Taylor rule; monetary policy; European Central Bank; Federal Reserve; Bank of England; Euro; Exchange rates.;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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