Optimal regional biases in ECB interest rate setting

Ivo Arnold ()

No 05-01, Nyenrode Research Papers Series from Nyenrode Business Universiteit

Abstract: This paper uses a simple model of optimal monetary policy to consider whether the influence of national output and inflation rates on ECB interest rate setting should equal a country’s weight in the eurozone economy. The findings depend on assumptions regarding interest rate elasticities, exchange rate elasticities, and openness vis-à-vis non-eurozone countries. The major conclusion is that the ECB should respond less to inflation shocks in EMU countries that have strong trading ties with non-eurozone countries. Intuitively, these countries can take care of some of the monetary tightening themselves, through a real appreciation vis-à-vis their non-eurozone trading partners.

Keywords: EMU, Taylor rule; Optimal monetary poli (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-mac and nep-mon
Date: 2005
View list of references

Downloads: (external link)
http://www.nyenrode.nl/facultyandresearch/nri/Docu ... g%20papers/05-01.pdf (application/pdf)

Related works:
Journal Article: Optimal regional biases in ECB interest rate setting (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:dgr:nijrep:2005-01

Access Statistics for this paper

More papers in Nyenrode Research Papers Series from Nyenrode Business Universiteit
Series data maintained by Ronald Piebes ().