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Title:Interest rate reaction functions for the euro area Evidence from panel data analysis PDF Logo
Authors:Ruth, Karsten
Issue Date:2004
Series/Report no.:Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2004,33
Abstract:As of today, estimating interest rate reaction functions for the Euro Area is hampered by the short time span since the conduct of a single monetary policy. In this paper we circumvent the common use of aggregated data before 1999 by estimating interest rate reaction functions based on a panel including actual EMU Member States. We find that exploiting the cross-section dimen- sion of a multi-country panel and accounting for cross-country heterogeneity in advance of the single monetary policy pays off with regard to the estimated reaction functions' ability to describe actual interest rate dynamics. We retrieve a panel reaction function which is demonstrated to be a valuable tool for evaluating episodes of monetary policy since 1999.
Subjects:Monetary Policy
Reaction Function
Euro Area
Panel Data
JEL:E43
E58
C33
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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