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What's on the ECB's mind? : Monetary policy before and after the global financial crisis

Title data

Zahner, Johannes ; Groß, Jonas:
What's on the ECB's mind? : Monetary policy before and after the global financial crisis.
Marburg : Philipps-University Marburg, School of Business and Economics, 2020

Official URL: Volltext

Abstract in another language

This paper analyzes the interest rate setting of the European Central Bank (ECB) both before and after the outbreak of the global financial crisis. In the current monetary policy literature, researchers typically select one Taylor rule-based model in order to analyze the interest rate setting of central banks, but neglect uncertainty about the choice of this respective model. We apply a Bayesian model averaging (BMA) approach to extend the standard Taylor rule to account for model uncertainty driven by heterogeneity in the ECB decision-making body, the governing council. Our results suggest the following: First, the ECB acts according to its official mandate to maintain price stability and therefore to focus its decisions on the inflation rate. Second, economic activity measures have been in the focus of the ECB before the financial crisis broke out. Third, over the last decade, the role of economic activity for ECB monetary policy has decreased so that inflation seems to be the main driver of monetary policy decisions. Fourth, central bankers appear to consider more than one model when they decide about monetary policy measures.

Further data

Item Type: Project report, research report, expert assessments
Keywords: European Central Bank; Taylor Rule; Bayesian Model Averaging; Model Uncertainty
Subject classification: JEL Classification: C11, E43, D81, E52, E58
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I - International Economics and Finance > Chair Economics I - International Economics and Finance - Univ.-Prof. Dr. Bernhard Herz
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences
300 Social sciences > 330 Economics
Date Deposited: 09 Nov 2020 12:29
Last Modified: 09 Nov 2020 13:14
URI: https://eref.uni-bayreuth.de/id/eprint/59377