Assessing Monetary Rules Performance Across Emu Countries
32 Pages Posted: 23 Nov 2000
Date Written: October 2000
Abstract
The topic covered in the paper is the performance of different monetary policy rules thought to be used as a guidline in pratical policymaking. In this respect, different rules are estimated using alternative econometrics techniques. A comparative analysis based on the ability of the rules in capturing the historical cantral banks' behavior and on the volatility on the output, inflation and interest rate changes that they imply is performed. The study is conducted on the EMU Countries. The results suggest that the simple rules perform quite well and that the gains obtained from adopting an optimal control-based rule are not so large. Moreover the addition of a forward-looking dimension and of an interest rate smoothing term in the reaction function seems to improve the performance of the rules.
Keywords: inflation targeting, monetary rule, ECB
JEL Classification: E52, C52
Suggested Citation: Suggested Citation
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