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Monetary policy reaction functions: ECB versus Bundesbank

Bernd Hayo and Boris Hofmann ()

No B 24-2003, ZEI Working Papers from University of Bonn, ZEI - Center for European Integration Studies

Abstract: We estimate monetary policy reaction functions for the Bundesbank (1979:4-1998:12) and the European Central Bank (1999:1-2003:7). The Bundesbank regime can be characterised, both before and after German reunification, by an inflation weight of 1.2 and an output weight of 0.4. The estimates for the ECB are 1.2, and 1, respectively. Thus, the ECB, while reacting similarly to expected inflation, puts significantly more weight on stabilising the business cycle than the Bundesbank did.

Keywords: Taylor rule; monetary policy; ECB; Bundesbank (search for similar items in EconPapers)
JEL-codes: E5 (search for similar items in EconPapers)
Date: 2003
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