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One Zins Fits All? Die Gratwanderung der EZB

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  • Hungerland Wolf-Fabian

Abstract

This paper analyses the European Central Bank’s (ECB) challenge in applying a uniform interest rate across the economically diverse Eurozone using the Taylor Rule. The analysis reveals that the ECB’s one-size-fits-all interest rate often fails to align with the economic conditions of individual member states, leading to periods of overly restrictive or loose monetary policy, especially noticeable during significant events like the global financial and euro crisis and during the recent inflation spike. The findings suggest a significant mismatch between the ECB’s actual rates and those recommended by the Taylor Rule, with the discrepancies largely dependent on the assumed natural interest rate. The analysis reveals that varying assumptions about the natural rate significantly affect the perceived appropriateness of the ECB’s policies, and that only the inclusion of monetary policy instruments beyond the interest rate help explain these findings.

Suggested Citation

  • Hungerland Wolf-Fabian, 2024. "One Zins Fits All? Die Gratwanderung der EZB," Wirtschaftsdienst, Sciendo, vol. 104(9), pages 644-650.
    • Handle: RePEc:vrs:wirtsc:v:104:y:2024:i:9:p:644-650:n:1016
    DOI: 10.2478/wd-2024-0165
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    References listed on IDEAS

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    1. Sandra Eickmeier & Josefine Quast & Yves Schuler, 2024. "Macroeconomic and Financial Effects of Natural Disasters," CAMA Working Papers 2024-23, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. David Vines & Paola Subacchi, 2023. "From the Bretton Woods system to the global non-system: the trials and tribulations of slow learning," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 39(2), pages 195-209.
    3. Ferreira, Thiago R.T. & Shousha, Samer, 2023. "Determinants of global neutral interest rates," Journal of International Economics, Elsevier, vol. 145(C).
    4. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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