Is Monetary Policy in the Eurozone less Effective than in the US?

30 Pages Posted: 15 Dec 2005  

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

Date Written: November 2005

Abstract

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.

JEL Classification: E50, E52, E58

Suggested Citation

De Grauwe, Paul and Costa Storti, Claudia, Is Monetary Policy in the Eurozone less Effective than in the US? (November 2005). CESifo Working Paper Series No. 1606. Available at SSRN: https://ssrn.com/abstract=870394

Paul De Grauwe (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Claudia Costa Storti

Banco de Portugal ( email )

Ave Almirante Reis 72
1150 Lisbon
Portugal
+351 21 313 0823 (Phone)
+351 21 352 3505 (Fax)

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