The European Central Bank, the Federal Reserve and the Bank of England: is the Taylor Rule an useful benchmark for the last decade?

Forte, Antonio (2009): The European Central Bank, the Federal Reserve and the Bank of England: is the Taylor Rule an useful benchmark for the last decade?

Abstract

The Taylor rule has been used in many studies in order to analyse the monetary policies. In my work I focus on the Euro era and compare the ECB with other two central banks, the Fed and the BoE. A very interesting result comes out from the analysis: it seems that these central banks do not observe the inflation course before deciding about the variation of the interest rates. This result can be linked to two ideas: firstly, the use of stationary time series drops out the significance of the inflation gap as regressor; secondly, a really forward looking central bank focuses on other macroeconomic leading indicators instead of examining the realized or expected inflation gap.

• Item Type: MPRA Paper
• Language: English
• Keywords: Taylor rule, monetary policy, European Central Bank, Federal Reserve, Bank of England, Euro, Exchange rates.
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

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