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

ZEI Working Paper No. B09-2002

26 Pages Posted: 11 Sep 2002

See all articles by Volker Clausen

Volker Clausen

University of Duisburg-Essen - Faculty of Economic Science

Bernd Hayo

University of Marburg - School of Business & Economics

Date Written: May 2002

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.

Keywords: European Monetary Union, Monetary policy, Semi-structural modelling, Reaction function, Taylor rule, Transmission mechanism

JEL Classification: E52, F41

Suggested Citation

Clausen, Volker and Hayo, Bernd, Monetary Policy in the Euro Area - Lessons from the First Years (May 2002). ZEI Working Paper No. B09-2002. Available at SSRN: https://ssrn.com/abstract=313779 or http://dx.doi.org/10.2139/ssrn.313779

Volker Clausen

University of Duisburg-Essen - Faculty of Economic Science ( email )

FB5- International Economics Universitaetsstr. 12
45117 Essen
Germany
+49 201 183-3655 (Phone)
+49 201 183-3974 (Fax)

Bernd Hayo (Contact Author)

University of Marburg - School of Business & Economics ( email )

Universitaetsstr. 24
Marburg, D-35032
Germany
++49(0)6421-28-23091 (Phone)
++49(0)6421-28-23193 (Fax)

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