The Federal Funds Rate and the Conduction of the International Orchestra

Antonio Ribba ()

Department of Economics from University of Modena and Reggio E., Faculty of Economics "Marco Biagi"

Abstract: In the first ten years of EMU, monetary policy choices of the European Central Bank (ECB) in setting the short-term interest rate have followed, systematically, monetary policy decisions made by the Federal Reserve System (Fed). For, despite the presence of variable lags with respect to Fed decisions, turning points of European short-term interest rates have been largely anticipated by movements in the federal funds rate. In this paper we show that, in the context of a bivariate cointegrated system, a clear long-run US dominance emerges. Moreover, the structural analysis reveals that a permanent increase in the federal funds rate causes a permanent one-for-one movement in the eonia rate.

Keywords: Monetary policy; Identification; Structural Cointegrated VARs (search for similar items in EconPapers)
JEL-codes: C32 E5 (search for similar items in EconPapers)
Pages: pages 9
Date: 2010-06
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
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Related works:
Journal Article: The federal funds rate and the conduction of the international orchestra (2012)
Working Paper: The federal funds rate and the conduction of the international orchestra (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:mod:depeco:0629

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