A Comparison Between the Fed and the ECB : Taylor Rules


Ullrich, Katrin


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URL: http://ub-madoc.bib.uni-mannheim.de/182
URN: urn:nbn:de:bsz:180-madoc-1824
Document Type: Working paper
Year of publication: 2003
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: E58 ,
Subject headings (SWD): Federal Reserve System , Europäische Zentralbank
Abstract: This paper analyzes whether Taylor-type policy rules can be used to describe the behavior of the Federal Reserve and the European Central Bank from the beginning of 1999 until mid 2002. Since there was no common monetary policy for the Euro area before 1999, we examine if the average Central Bank behavior of the countries forming the European Monetary Union can be approximated by a single reaction function. We compare the currency areas by searching for similarities and distinctions between the Taylor-type reaction functions of the two central banks. We pay particular attention to the possible influence of one central bank on the behavior of the other one. The simplest method to test this interdependence is to compare the two reaction functions and try to incorporate the decision variable of one central bank into the other central bank's reaction function. The estimations show that there are significant differences in the reaction functions of both central banks before and after 1999 and between the two central banks. The second result is that the Fed seems to influence the ECB but not vice versa.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Ullrich, Katrin (2003) A Comparison Between the Fed and the ECB : Taylor Rules. Open Access [Working paper]
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