And if One Size Fit All after All? A Counterfactual Examination of the ECB Monetary Policy under Duisenberg Presidency

Jérôme Héricourt

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Abstract: How did European Central Bank (ECB) fit the disparate macroeconomic needs of euro area members? The purpose of this paper consists in providing quantitative answers to this question presenting an original methodology. After estimating unified frameworks of monetary transmission mechanisms for nine euro zone countries, we compute the national evolutions of output gap and inflation since 1999, in a fictitious context where the euro has never been launched. Using a loss function as a standard for macroeconomic stabilization, these simulations are then compared with the actual outcomes over the period 1999-2003. Our major result is that the ECB did a far better stabilization job for euro zone countries than national central banks would have done.

Keywords: Taylor rules; monetary policy transmission; counterfactual simulation; stabilization; règles de Taylor; transmission de la politique monétaire; simulation contrefactuelle; stabilisation (search for similar items in EconPapers)
Date: 2005-11
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03280963v1
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Published in 2005

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Working Paper: And if One Size Fit All after All? A Counterfactual Examination of the ECB Monetary Policy under Duisenberg Presidency (2005)
Working Paper: And if one size fit all after all? A counterfactual examination of the ECB monetary policy under Duisenberg presidency (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-03280963

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