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Title: Does one size fit all? A Taylor-rule based analysis of monetary policy for current and future EMU members
Authors: Moons, Cindy # ×
Editors: Van Poeck, André
Issue Date: Mar-2008
Publisher: Routledge Limited
Series Title: Applied Economics vol:40 issue:2 pages:193-199
Abstract: The paper deals with the following questions: (1) Are there differences between the interest rates aggregated from the Taylor interest rates of individual member states in the euro area and the interest rate set by the ECB? (2) For which countries do the desired interest rate according to the original Taylor rule and the interest rate of the euro area differ most and in which respect? The second part includes the accession countries in the analysis. (3) The last question applied to both currency areas (old and potential new) is whether the interest rate gaps change over time. To answer these questions, first the appropriateness of using the original Taylor rule are calculated and these country-specific interest rates are compared with the euro area interest rate. The gaps between the individual interest rates and the aggregated interest rate are calculated using measures like the mean error and the root mean squared error. To track the interest rate differences over time the average root mean squared interest rate gaps for all member states of the EMU are calculated for every quarter. The main results are that the aggregated interest rate of the euro area fits the individual Taylor interest rates not equally well for all member states of the EMU. This situation also applies to the potential new member states. The average interest rate gaps show a different behaviour for the old and new member states.
ISSN: 0003-6846
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Centre for Globalization, Innovation and Competition, Campus Brussels (-)
Department of ECON-CEDON, Campus Brussels
× corresponding author
# (joint) last author

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