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Title:How the ECB and US Fed set interest rates PDF Logo
Authors:Belke, Ansgar
Polleit, Thorsten
Issue Date:2006
Series/Report no.:Working paper series // HfB - Business School of Finance & Management 72
Abstract:Monetary policies of the ECB and US Fed can be characterised by Taylor rules, that is both central banks seem to be setting rates by taking into account the output gap and inflation. We also set up and tested Taylor rules which incorporate money growth and the euro-dollar exchange rate, thereby improving the fit between actual and Taylor rule based rates. In general, Taylor rules appear to be a much better way of describing Fed policy than ECB policy. Simulations suggest that the ECB's short-term interest rates have been at a much lower level in the last two years compared with what a Taylor rule would suggest.
Subjects:European Central Bank
Federal Reserve
Monetary policy
Taylor rule
JEL:E43
E58
Persistent Identifier of the first edition:urn:nbn:de:101:1-2008082788
Document Type:Working Paper
Appears in Collections:Frankfurt School - Working Paper Series, Frankfurt School of Finance and Management

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