The Monetary Policy of the ECB: A Robin Hood Approach?

Marcus Drometer (), Thomas Siemsen and Sebastian Watzka

No 4178, CESifo Working Paper Series from CESifo

Abstract: We derive counterfactual national interest rate paths for the 17 Euro Area countries for the period 1999 to 2012 to approximate the interest rates countries would have implemented had they still been able to conduct independent monetary policy. We find that prior to the financial crisis the counterfactual interest rates for Germany trace the realized EONIA rate very closely, while monetary policy has been too loose especially for the southern European countries. This situation was inverted with the onset of the financial crisis. To shed light on the underlying decision rule of the ECB, we rank different mechanisms according to their ability to aggregate the national counterfactual paths to the EONIA rate. We find that mechanisms which focus on countries which fare economically worse than the Euro Area average explain the EONIA path best.

Keywords: decision rule; aggregation rule; counterfactual interest rate path; ECB; Bundesbank (search for similar items in EconPapers)
JEL-codes: E02 E42 E47 E52 E58 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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