Monetary Policy Reaction Functions: ECB Versus Bundesbank

ZEI Working Paper No. B03-24

21 Pages Posted: 28 Dec 2003

See all articles by Bernd Hayo

Bernd Hayo

University of Marburg - School of Business & Economics

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: December 2003

Abstract

We estimate monetary policy reaction functions for the Bundesbank (1979:4-1998:12) and the European Central Bank (1999:1-2003:7). The Bundesbank regime can be characterised, both before and after German reunification, by an inflation weight of 1.2 and an output weight of 0.4. The estimates for the ECB are 1.2, and 1, respectively. Thus, the ECB, while reacting similarly to expected inflation, puts significantly more weight on stabilising the business cycle than the Bundesbank did.

Keywords: Taylor rule, monetary policy, ECB, Bundesbank

JEL Classification: E5

Suggested Citation

Hayo, Bernd and Hofmann, Boris, Monetary Policy Reaction Functions: ECB Versus Bundesbank (December 2003). ZEI Working Paper No. B03-24. Available at SSRN: https://ssrn.com/abstract=481662 or http://dx.doi.org/10.2139/ssrn.481662

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)

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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