Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152640
Authors: 
Gerdesmeier, Dieter
Roffia, Barbara
Year of Publication: 
2003
Series/Report no.: 
ECB Working Paper 206
Abstract: 
This paper contains a set of estimates of reaction functions for the euro area based on a monthly data set starting in 1985. The main aim is to assess the performance of Taylor rules and to evaluate whether alternative specifications based, inter alia, on the inclusionc of additional variables not contained in the original specification proposed by Taylor or the use of different measures of the output gap and the inflation term, can better track the interest rate setting in the euro area. An interesting result is that monetary developments (in the form of a money growth gap indicator derived as the deviation of M# growth from its estimated reference value) enter significantly as an additional variable in a Taylor-like policy rule specification for the euro area.
Subjects: 
euro area
monetary policy
reaction functions
Taylor rules
JEL: 
E58
F41
Document Type: 
Working Paper

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