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

Altavilla, Carlo, Assessing Monetary Rules Performance Across Emu Countries (October 2000). Available at SSRN: https://ssrn.com/abstract=248309 or http://dx.doi.org/10.2139/ssrn.248309

Carlo Altavilla (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany