Interest Rate Setting by the ECB: Words and Deeds
49 Pages Posted: 15 Feb 2005
Date Written: December 2004
Abstract
This Paper discusses interest rate setting by the ECB between 1999 and 2004. I develop from the Monthly Bulletins quantitative indicators of the Governing Council's assessment of inflation, economic activity, and M3 growth, and investigate their impact on its interest rate decisions. I also estimate reaction functions with ordered probit techniques, using the Monthly Bulletins to guide the choice of variables for the analysis. The results show that the ECB reacts strongly to economic sentiment indicators as measures of the state of the real economy. Furthermore, I find statistically significant reactions to inflation and M3 growth.
Keywords: ECB, empirical reaction functions, ordered probit
JEL Classification: E43, E52, E58
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Empirical Estimates of Reaction Functions for the Euro Area
By Dieter Gerdesmeier and Barbara Roffia
-
An Empirical Comparison of Bundesbank and ECB Monetary Policy Rules
By Jon Faust, John H. Rogers, ...
-
Regional Influences on U.S. Monetary Policy: Some Implications For Europe
By Ellen E. Meade and Nathan Sheets
-
Is the View from the Eurotower Purely European? - National Divergence and ECB Interest Rate Policy
-
Using Taylor Rules to Understand ECB Monetary Policy
By Stephan Sauer and Jan-egbert Sturm
-
Interest Rate Reaction Functions and the Taylor Rule in the Euro Area
-
One Size Must Fit All: National Divergences in a Monetary Union
By Daniel Gros and Carsten Hefeker
-
Monetary Policy Reaction Functions: ECB Versus Bundesbank
By Bernd Hayo and Boris Hofmann
-
Comparing Monetary Policy Reaction Functions: ECB Versus Bundesbank
By Bernd Hayo and Boris Hofmann