Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96626
Authors: 
Quint, Dominic
Year of Publication: 
2014
Series/Report no.: 
Discussion Paper, School of Business & Economics: Economics 2014/13
Abstract: 
The ECB's one size monetary policy is unlikely to fit all euro area members at all times, which raises the question of how much monetary policy stress this causes at the national level. I measure monetary policy stress as the difference between actual ECB interest rates and Taylor-rule implied optimal rates at the member state level. Optimal rates explicitly take into account the natural rate of interest to capture changes in trend growth. I find that monetary policy stress within the euro area has been steadily decreasing prior to the recent financial crisis. Current stress levels are not only lower today than in the late 1990s, they are also in line with what is commonly observed among U.S. states or pre-euro German Länder.
Subjects: 
euro area
currency union
European Central Bank
ECB
Taylor rule
real natural rate
common monetary policy
monetary policy stress
inflation
JEL: 
C22
E53
E58
Document Type: 
Working Paper

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