Is the View from the Eurotower Purely European? - National Divergence and ECB Interest Rate Policy

Heinemann, Friedrich; Hüfner, Felix

doi:10.2139/ssrn.374600

Cited by 33 publications

(53 citation statements)

References 9 publications

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“…In the case of the US Federal Reserve System, Meade and Sheets (2002) have shown that the members of the Board take into account regional data when deciding about monetary policy, presumably because they believe that the use of regional data is welfare improving. Similar results have been obtained by Heinemann and Hüfner (2002).…”

Section: Introductionsupporting

confidence: 91%

Asymmetries in Monetary Policy Transmission: Some Implications for EMU and its Enlargement

Grauwe

Sénégas

2004

J of Common Market Studies

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In this article we analyse how the enlargement of a monetary union may affect the design of the common monetary policy when the latter transmits asymmetrically between the member countries. We find that the use of national information about inflation and unemployment in the design of the common monetary policy allows for tackling the heterogeneity induced by this asymmetry. This implies that if enlargement contributes to augmenting the transmission asymmetry of monetary policy in EMU, it will raise the need to take into account information about national economies in the formulation of optimal monetary policies in the monetary union. Furthermore, the choice for a new EU Member State to enter EMU will also depend on the monetary strategy implemented by the European Central Bank and, in particular, whether the latter would take the asymmetries in the transmission of monetary policy actions into account. Copyright Blackwell Publishing Ltd 2004.

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Section: Introductionsupporting

confidence: 91%

Asymmetries in Monetary Policy Transmission: Some Implications for EMU and its Enlargement

Grauwe

Sénégas

2004

J of Common Market Studies

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“…r Verein für Socialpolitik and Blackwell Publishing Ltd. 2006 interests, presumably because of political pressure in their home countries (Alesina et al, 2001;Aksoy et al, 2002;Berger and De Haan, 2002;Heinemann and Hüfner, 2002;Meade and Sheets, 2002). The internal voting process would then result in a policy strategy which is concerned with the 'median country'.…”

Section: Estimating the Ecb Policy Reaction Functionmentioning

confidence: 99%

Estimating the ECB Policy Reaction Function

Carstensen

2006

German Economic Review

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This paper estimates the policy reaction function of the European Central Bank in the first four years of EMU using an ordered probit model which accounts for the fact that central bank rates are set at multiples of 25 basis points. Starting from a baseline model which mimics the Taylor rule, the impacts of different economic variables on interest rate decisions are analysed. It is concluded that the monetary growth measure which was announced by the ECB as the first pillar of their monetary strategy does not play an outstanding role for the actual interest rate decisions. More sophisticated measures like the money overhang which uses information from both pillars are better suited. Overall, it is concluded that the revision of the monetary policy strategy in May 2003 which implied a downgrading of the first pillar will not induce any observable changes in monetary policy decisions. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2006.

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Section: Introductionmentioning

confidence: 99%

“…Heinemann and Huefner (2004) tackle whether ECB policy makers consider national data rather than euro-wide economic data when setting interest rates. Heinemann and Huefner (2004) report some evidence for national bias. Fendel and Frenkel (2009) find that the ECB is less likely to tighten policy when high inflation differentials rise between euro members to deflationary in the low inflation countries.…”

Section: Introductionmentioning

confidence: 99%