Monetary Policy Rules in the Pre-Emu Era: Is There a Common Rule?

65 Pages Posted: 2 Aug 2006

See all articles by Maria Eleftheriou

Maria Eleftheriou

Universidad Rey Juan Carlos

Dieter Gerdesmeier

European Central Bank (ECB)

Barbara Roffia

European Central Bank (ECB)

Date Written: July 2006

Abstract

Despite the great importance and final success of the convergence process that led to the establishment of the European Monetary Union, there is no clear agreement regarding the monetary policy pursued in the member countries during the convergence process. This paper contributes to the literature with an empirical analysis of the period from 1993 to 1998 that encompasses eleven EMU countries. In particular, Taylor-type interest rate rules are estimated with monthly national data to find that, despite certain similarities and exceptions, the rule followed by each country is distinct and differs substantially from the standard Taylor rule. However, for most countries, the parameter estimates reflect the principles proclaimed by the monetary policy authorities and, in addition, it is shown that in most cases the estimated rules reproduce the policy setting quite closely.

Keywords: Taylor rule, ERM, output gap, monetary policy

JEL Classification: E58, F41

Suggested Citation

Eleftheriou, Maria and Gerdesmeier, Dieter and Roffia, Barbara, Monetary Policy Rules in the Pre-Emu Era: Is There a Common Rule? (July 2006). ECB Working Paper No. 659. Available at SSRN: https://ssrn.com/abstract=913334

Maria Eleftheriou (Contact Author)

Universidad Rey Juan Carlos ( email )

Calle Tulipán, s/n
Madrid, Móstoles 28230
Spain

HOME PAGE: http://https://gestion2.urjc.es/pdi/ver/maria.eleftheriou

Dieter Gerdesmeier

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Barbara Roffia

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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