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Monetary Policy in the Euro Area - Lessons from the First Years

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Listed:
  • Volker Clausen

    (University of Essen)

  • Bernd Hayo

    (University of Frankfurt and University of Essen)

Abstract

This paper investigates in a consistent semi-structural empirical framework three current issues of monetary policy in the euro area. First, regarding policy transmission we offer a three-stage procedure to combine the efficient estimation of economic structure prior to EMU with current ECB monetary policy. Second, we test whether the regime change leads - before or after - EMU to structural instability. Third, we investigate the stance of monetary policy in Europe. We compare a "counterfactual" ECB reaction function based on average interest rates prior to EMU with actual ECB policy. Furthermore, we compare actual ECB policy with interest rate projections using Bundesbank reaction functions and euroland data.

Suggested Citation

  • Volker Clausen & Bernd Hayo, 2002. "Monetary Policy in the Euro Area - Lessons from the First Years," Macroeconomics 0205006, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0205006
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    References listed on IDEAS

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    1. Yunus Aksoy & Paul De Grauwe & Hans Dewachter, 2014. "Do Asymmetries Matter for European Monetary Policy?," World Scientific Book Chapters, in: Exchange Rates and Global Financial Policies, chapter 13, pages 321-353, World Scientific Publishing Co. Pte. Ltd..
    2. Volker Clausen & Bernd Hayo, 2006. "Asymmetric monetary policy effects in EMU," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1123-1134.
    3. Ilian Mihov, 2001. "Monetary policy implementation and transmission in the European Monetary Union," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 16(33), pages 370-406.
    4. Wyplosz, Charles, 1989. "Asymmetry in the EMS: Intentional or systemic?," European Economic Review, Elsevier, vol. 33(2-3), pages 310-320, March.
    5. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
    6. Michele Fratianni & Juergen Hagen, 1990. "German dominance in the EMS," Open Economies Review, Springer, vol. 1(1), pages 67-87, February.
    7. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    8. Gerlach, Stefan & Schnabel, Gert, 2000. "The Taylor rule and interest rates in the EMU area," Economics Letters, Elsevier, vol. 67(2), pages 165-171, May.
    9. Richard H. Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary policy rules in practice," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    10. Kashyap, Anil K. & Mojon, Benoît & Terlizzese, Daniele & Backé, Peter, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series 114, European Central Bank.
    11. Hagen, Jurgen von & Fratianni, Michele, 1990. "German dominance in the EMS: evidence from interest rates," Journal of International Money and Finance, Elsevier, vol. 9(4), pages 358-375, December.
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    More about this item

    Keywords

    European Monetary Union; Monetary policy; Semi-structural modelling; Reaction function; Taylor rule; Transmission mechanism;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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