How the ECB and the US Fed set interest rates
Year: 2007
Type: article
Abstract: Monetary policies of the European Central Bank (ECB) and US Fed can be characterized by ‘Taylor rules’, that is both central banks seem to be setting rates by taking into account the ‘output gap’ and inflation. We also set up and tested Taylor rules which incorporate money growth and the euro–dollar exchange rate, thereby improving the ‘fit’ between actual and Taylor rule based rates. In general, Taylor rules appear to be a much better way of describing Fed policy than ECB policy. Simulations suggest that the ECB's short-term interest rates have been at a much lower level in the last 2 years compared with what a Taylor rule would suggest.
Source: Applied Economics
Authors: Ansgar Belke, Thorsten Polleit
Language: English
Domain: Social Sciences
Open Access status: green
Funder: Deutsche Bundesbank
OpenAlex ID: W2133373365