Is Monetary Policy in the Eurozone less Effective than in the US?
Paul De Grauwe
London School of Economics & Political Science (LSE); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR)
Claudia Costa Storti
Banco de Portugal
CESifo Working Paper Series No. 1606
There is a wide consensus that the existence of structural rigidities in the Eurozone reduces the effectiveness of the ECB's monetary policies. In order to test this "ECB-handicap" hypothesis, we perform a meta-analysis of the effects of monetary policies in the US and the Eurozone countries. This consists of collecting the estimated transmission coefficients obtained from published econometric studies. Meta-analysis then allows us to control for a number of factors that can affect these estimated coefficients. We conclude that there is no evidence for the hypothesis that the ECB is handicapped in using monetary policies for the purpose of stabilizing output compared to the US.
Number of Pages in PDF File: 30
JEL Classification: E50, E52, E58
Date posted: December 15, 2005