On the Robustness of the "Taylor Rule" in the EMU

Maria Eleftheriou

No ECO2003/17, Economics Working Papers from European University Institute

Abstract: Following a policy rule mechanically when operating monetary policy is neither realistic nor practical. Nevertheless, monetary policy rules have received a great deal of attention in recent macroeconomic research. The paper focuses on a famous interest rate rule, namely the Taylor Rule, to show that the rule parameters are robust to most of the output gap measures and the specifications considered, i.e. the inflation coefficient is above unity and the output gap coefficient is positive. The estimated rule is shown to track the actual policy performance during the EMU period remarkably well. In addition, the estimated rule is used as an indicator of macroeconomic convergence in the union and it is demonstrated that the optimal EMU rate has not been in accordance with domestic conditions in certain countries.

JEL-codes: E58 (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-eec, nep-fin, nep-ifn, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.iue.it/PUB/ECO2003-17.pdf main text
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
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:eui:euiwps:eco2003/17

Access Statistics for this paper

More papers in Economics Working Papers from European University Institute Badia Fiesolana, Via dei Roccettini, 9, 50014 San Domenico di Fiesole (FI) Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Cécile Brière ().