EconPapers    
Economics at your fingertips  
 

The Fed and the ECB: why such an apparent difference in reactivity?

Alexis Penot () and Grégory Levieuge

Journal of Financial Economic Policy, 2009, vol. 1, issue 4, 319-337

Abstract: Purpose - The purpose of this paper is to try to understand the reasons for the differences in amplitude of monetary policy (MP) rate cycles in the USA and the euro area. Among the different candidates, the paper aims to test the role of economic structures, macroeconomic shocks, and MP behaviour. Design/methodology/approach - The paper starts by estimating vector autoregressive models both for the USA and the euro area to identify the economic structures, the MP rules, and the macroeconomics shocks of both areas. Then, it runs counterfactual simulations (by injecting European Central Bank's (ECB) monetary rule in the US model for example) to examine which factors had the most significant impact on differences in MP activism (measured by the variance of interest rates). Findings - The paper finds that differences implied by MP rules alone cannot explain the dissimilarity of interest rates paths. In the same way, while cyclical shocks are different in each area, they do not suffice to explain the factual divergences. Finally, it is the structural dissimilarities which essentially explain the difference in interest rate variances. Originality/value - The paper brings new informations on a controversial issue and it tends to reject the official explanations given by ECB's governor who points out differences in shocks.

Keywords: Monetary policy; United States of America; Europe (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
Working Paper: The FED and the ECB: Why such an apparent difference of reactivity? (2010)
Working Paper: The Fed and the ECB: Why such an apparent difference in reactivity? (2008) Downloads
Working Paper: The Fed and the ECB: Why such an apparent difference in reactivity? (2008) Downloads
Working Paper: The FED and the ECB: Why Such an Apparent Difference in Reactivity? (2008)
Working Paper: THE FED and the ECB: Why Such an Apparent Difference in Reactivity? (2008)
Working Paper: The FED and the ECB: Why Such an Apparent Difference in Reactivity? (2008)
Working Paper: The Fed and the ECB: Why Such an Apparent Difference in Reactivity ? (2008)
Working Paper: The Fed and the ECB: Why Such an Apparent Difference in Reactivity ? (2008) Downloads
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: https://EconPapers.repec.org/RePEc:eme:jfeppp:v:1:y:2009:i:4:p:319-337

DOI: 10.1108/17576380911050052

Access Statistics for this article

Journal of Financial Economic Policy is currently edited by Prof Franklin Mixon

More articles in Journal of Financial Economic Policy from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().

 
Page updated 2025-03-19
Handle: RePEc:eme:jfeppp:v:1:y:2009:i:4:p:319-337