How has European Monetary Policy Changed since the creation of the ECB? Estimation of Taylor Rule for the EMU (1991-2005)
This paper aims to use a Taylor Rule to characterise the monetary policy applied by the ECB and to test whether there are significant differences compared to the monetary policy applied in the previous years by the central banks of the 12 countries currently forming part of the EMU. We see that the Taylor rule estimated to characterise the 1991-1998 period does not correctly reflect the behaviour of the ECB and a Chow test confirms the existence of a structural change from that date on. This change supposes a reduction in the neutral real interest rate and a change in the rule’s coefficients, with an increase in the output gap coefficient and an important decrease in the response to inflation deviations. Another result derived from our estimates is that interest rates are associated to a high level of inertia. However, the introduction of other variables into the rule, such as the Federal Reserve interest rate, variation in the real euro-dollar exchange rate or deviation of the M3 growth rate from the reference value established by the ECB, is of little significance when explaining interest rate variations.
|Date of creation:||Mar 2006|
|Contact details of provider:|| Postal: Plaza de la Victoria, 2 C.P. 28802, Alcalá de Henares|
Phone: (00 34) 91 885 52 25
Fax: (00 34) 91 885 52 21
Web page: http://www.iaes.es
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:uae:wpaper:0306. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laura Suarez)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.